
Q^ 



CopyrightN^. 



COPYRIGHT DEPOSil^ 



THE ECONOMIC UTILIZATION 
OF HISTORY 



The Economic Utilization 
of History 

and 

Other Economic Studies 



By 
HENRY W. FARNAM 

Professor of Economics, Yale University 




New Haven: Yale University Press 

London: Henry Frowde 

Oxford University Press 

MCMXni 



.V 



ti^ 



Copyright, 1913 
By Yale University Press 



Printed February, 1913, 1100 copies 



©Cl.A33263-i 



The Economic Utilization of History and 
Other Economic Studies 



CHAPTER : 

I. The Economic Utilization of His- 
tory 


Page 
1 


II. 


Some Questions of Methodology 


18 


III. 


Economic Experimentation in the 
United States .... 


34 


IV. 


The Pathology of Progress . 


58 


V. 


Economic Progress and Labor Legis- 
lation . . 


68 


YI. 


Fundamental Distinctions in Labor 
Legislation .... 


82 


VII. 


Purposes of Labor Legislation 


94 



VIII. Practical Methods in Labor Legis- 
lation ..... 104 

IX. Acatallactic Factors in Distribu- 
tion 122 

X. A Socialized Business Enterprise . 138 

XI. Social Myopia . . . .165 

XII. Signs of a Better Social Vision . 187 



Digitized by the Internet Archive 
in 2010 with funding from 
The Library of Congress 



http://www.archive.org/details/economicutilizat01farn 



PREFACE 

The contents of this little volume consist 
in the main of studies which have already 
appeared in print. All of them have, how- 
ever, been revised, and the greater part of 
the first two chapters is new. Though the 
studies have been written for special occa- 
sions during the past four years, they all 
represent one point of view, and the last 
nine chapters may be considered an appli- 
cation in the several fields of labor legisla- 
tion, business organization, and charity, of 
the scientific methods advocated in Chap- 
ters I, II, and III. In order to bring out 
better this continuity of thought most of 
the essays have been subdivided, and new 
titles assigned to them. 

Chapters I, II, and III contain the presi- 
dential address delivered in Washington in 
1911 at the annual meeting of the Ameri- 
can Economic Association. Chapters IV, 
V, VI, VII, and VIII contain presidential 
addresses delivered before the American 
Association for Labor Legislation in 1909, 
1908, and 1910. Chapters IX and X con- 
tain an article originally published in the 



PEEFACE 

Yale Review for May, 1909, while Chapters 
XI and XII contain the address delivered 
in the spring of 1911 by the author as presi- 
dent of the Connecticnt Conference of 
Charities and Correction. Acknowledg- 
ment is hereby made of the courtesy of the 
American Economic Association, of the 
American Association for Labor Legisla- 
tion, of the Yale Review, and of the Con^ 
necticut Conference of Charities and Cor- 
rection for permission to use the matter 
already published by them. 

Henky W. Farnam. 

Yale University, October, 1912. 



THE ECONOMIC UTILIZATION 
OF HISTORY 



CHAPTER I 

The Economic Utilization of Histoey 

It is a common, if not a universal, 
assumption that economics is at a disad- 
vantage as compared with many of the 
natural sciences, in that it does not admit 
of laboratory experiments. There are two 
considerations which support this assump- 
tion. 

In the first place economics deals with 
human beings in their social relations. It 
does not even deal with them as indi- 
viduals. It must therefore consider large 
groups, often whole states or groups of 
states. The economist has neither the 
power to force, nor the wealth to pay for, 
experiments upon nations, and if he had, 
he would in many cases be deterred by 
moral scruples from attempting them. 
Such a power might conceivably be exer- 
cised by some oriental despot, and such 
persons have existed. Herod, the son of 
Antipater, e.g., if he had been as much 
interested in sociology as he was in poli- 



THE ECONOMIC UTILIZATION OF HISTOEY 

tics, would have made a good experimenter, 
since he was not only able but quite willing 
to put to death all of the children born 
within a certain time in Bethlehem. Mu- 
hammad, the son of Tughlak, who ruled 
Northern India from 1325 to 1351, is in the 
same class. He has been described as 
^'learned, merciless, religious and mad.'' 
He was thus equipped morally and men- 
tally as well as politically for trying social 
experiments on a large scale. And he did 
so. For we are told that he ^Hried to 
replenish his treasury by the simple expe- 
dient of coining brass in vast quantities 
and ordaining that it should be accepted 
as silver.''^ He thus decreed that the 
King's brass should be equal to the 
people's silver, and doubtless introduced 
among his people the familiar phenomena 
which follow an inflated currency. 

But Herod and Muhammad represent 
past types. The modern economist, even 
if he were at the same time a great states- 
man, could not deliberately experiment on 
a nation without running the risk of being 
committed either to an insane asylum or a 

1 The Imperial Gazetteer of India, The Indian Empire, 
Vol. II, 1908, p. 145. 



THE ECONOMIC UTILIZATION OF HISTOEY 

jail. And yet the really important thing 
for the economist is that experiments be 
tried, not that he try them himself, and in 
view of the great cost of social laboratory 
work the economist is really fortunate in 
having experiments tried for him without 
expense to himself and without involving 
him in any legal or moral liability. He 
cannot, it is true, like Herod, kill off the 
babies for the sake of watching the effect 
upon population or wealth, but society 
is constantly creating by law conditions 
which lead to the slaughter both of inno- 
cents and of adults, by preventable disease 
and accident.^ In many cases this needless 
increase of the death rate is brought about, 
as it was in the time of Herod, because our 
officeholders are more intent upon keeping 
their jobs than upon earning their salaries, 
and care more for politics than for soci- 
ology. We have in a republic no despot to 
force his brass into circulation, but what 
no despot would dare do to the people, the 
sovereign people cheerfully do to them- 
selves. When our country was divided by 
a civil war, the hostile sections, though 
bitterly opposed to each other in most 

2 For illustrations, see Chap. XI, pp. 168-177. 



THE ECONOMIC UTILIZATION OF HISTOEY 

questions, were yet alike in that each 
decreed to make the government's paper 
equal to the people's gold, and tried over 
again the experiment of an inflated cur- 
rency which had been tried by Muhammad, 
the son of Tughlak, and by many others 
after him. 

Thus we not only have experiments tried 
on a large scale in modern states, but it is 
fair to say that, the more democratic the 
country, the more ready on the whole it 
is to try experiments on itself. Indeed, 
economic experimentation is not only pos- 
sible, but it is so common that it is hardly 
recognized as experimentation, and the 
superabundant legislative activity of so 
many of our advanced and radical com- 
monwealths testifies to the mass of work 
of this kind which is being performed 
gratuitously for the economist. 

There is a second argument against the 
possibility of economic experimentation, 
which is perhaps more serious than the one 
which has been considered, and it deserves 
more detailed treatment, since it has had 
the support of eminent economists and 
logicians. We are told that, even if experi- 
ments are tried by modern governments. 



THE ECONOMIC UTILIZATION OF HISTOEY 

they are tried under such conditions as to 
have no scientific value and to permit of 
no convincing conclusions. This was the 
view of John Stuart Mill, at once a great 
logician and a great economist, and it has 
been accepted by many, if not most, of his 
successors. Mill, after enumerating the 
four different methods of experimentation 
which are possible, concludes that no one 
of them is adapted to the social sciences. 
Take, e.g., the methods of differences and 
of concomitant variations. In order to 
apply the former we must have two 
instances which tally in every particular 
except the one which is the subject of 
inquiry. In order to apply the latter we 
must have a series of phenomena varying 
together.^ 

To prove the inapplicability of the 
method of differences. Mill takes the exam- 
ple of a protective tariff and shows that it 
would be quite impossible to find two 
nations which are exactly alike in every 
respect excepting only in the presence or 
absence of such a tariff.* 

3 John Stuart Mill : A System of Logic^ 9tli edition, 
1875, Vol. I, pp. 448-471. 
4 1. c, Vol. II, p. 472. 



THE ECONOMIC UTILIZATION OF HI8T0EY 

The method of concomitant variations he 
thinks equally impossible, because every 
attribute of the social body is influenced by 
innumerable causes. Hence the changes 
are the effects, not of a single cause, but 
of the combination of many causes.^ 

We may concede the difficulty of apply- 
ing the method of differences to test the 
effect of a protective tariff upon the gen- 
eral wealth of nations, and yet recognize 
the possibility of experiments if applied in 
a different way. It will be noticed that the 
question which Mill asks is extremely 
vague. He inquires whether or not a pro- 
tective tariff is ^ ^favorable to national 
riches. ' ^ That very question itself requires 
a further explanation. What do we mean 
by ^^ national riches'^? Do we take into 
account the mass of wealth, or also its dis- 
tribution, and if we take account of its 
mass only, do we mean the total mass or 
the wealth per capita? We might con- 
ceivably have two states each of 30,000,000 
inhabitants, with an average wealth of 
$1,000 per inhabitant or a total of $30,000,- 
000,000. Let us suppose that at the end of 
the experimental period one of our states 

5 1. c, Vol. II, p. 475. 



THE ECONOMIC UTILIZATION OF HISTOEY 

has a popnlation of 45,000,000 with the 
same per capita wealth as at the beginning, 
or a total of $45,000,000,000, while the 
other has the same popnlation as at first, 
bnt an average wealth of $1,500 per capita, 
which wonld give the same total as that of 
the first state. Shall we conclude that the 
two states are equally well off, or shall we 
award the prize to the one which has the 
larger popnlation and a smaller per capita 
wealth, or to the other one? Apart from 
the vagueness of the question, it is clear 
that the tariff is only one of the many 
factors determining the wealth of nations, 
and that, moreover, the effect of the tariff 
in one country must depend, not simply 
upon factors affecting that country, but 
also upon the tariff policy of other coun- 
tries with which it trades. In other words, 
the example taken by Mill is of such a com- 
plicated character, that it could hardly be 
solved by the experimental method in one 
of the simpler sciences permitting of a full 
laboratory equipment. In chemistry, e.g., 
we should have an analogous case, if we 
were to ask, whether oxygen or hydrogen 
is the more useful element in the economy 
of nature. In order to apply the experi- 



THE ECONOMIC UTILIZATION OF HISTORY 

mental method to economic questions, we 
mnst apply it as it has been applied suc- 
cessfully to the natural sciences. Now the 
greatest achievements in science have been 
attained, not by putting such general ques- 
tions as that instanced by Mill, but by mak- 
ing the questions more and more specific, 
taking into account only a limited number 
of phenomena at a time. 

The science of medicine illustrates in its 
history this tendency of scientific method. 
The skilled physician no longer asks for 
the general effect on the total well-being 
of the human body of certain drugs or a 
certain diet, but he tries to isolate his 
phenomena and study them in detail. For 
example, people often ask the questions, 
Is it better to drink alcoholic liquors or to 
abstain 1 Is it better to eat both meat and 
vegetables or to chew vegetables and 
eschew meat? Now it is clear that general 
observations are not absolutely convincing 
on these topics. The friend of alcohol can 
produce plenty of instances of drinkers 
who have lived to a hale and hearty old 
age, and plenty of abstainers who have 
died young. The same can be done with 
regard to a meat diet. But the physiol- 



THE ECONOMIC UTILIZATION OF HISTOEY 

ogist can study the question of alcohol in 
detail and, by experimentation, can ascer- 
tain what its effects are upon digestion, 
upon the tissues, etc., and he can thus iso- 
late its effects from the many other effects 
which go to produce the total well-being of 
the body.^ Even in the practice of medi- 
cine physicians are tending more and more 
to give but a single drug at a time, in order 
the better to observe its effects, instead of 
a combination of drugs compounded with a 
view to producing general results. 

If the question which the economist 
desires to have answered is properly 
framed, and if he has at his command 
proper observations as to results, then it 
is not necessary to postulate a number of 
different nations exactly alike in all par- 
ticulars but one, any more than in studying 
the effect of drugs upon human beings it 
is always necessary to have a number of 
patients exactly alike. By applying or 
not applying a certain agency to the same 
person, we may often observe the effects 
of the policy with all of the certainty which 

6 As an example of this method, see Physiological 
Aspects of the Liquor Problem, 2 vols., Houghton, Mifflin 
and Company, 1903. 



THE ECONOMIC UTILIZATION OF HISTOEY 

goes with a laboratory experiment. The 
same is true of nations, where most of the 
circumstances may be assumed to continue 
essentially the same throughout a consid- 
erable period, and where allowances can 
be made for such changes in circumstances 
as are inevitable. Thus, while it may well 
be impossible to trace the effect of a pro- 
tective tariff upon the general wealth of 
the country, it is not so difficult to trace 
its effect on the separate factors entering 
into that wealth, such as the distribution 
of wealth between different classes, the 
prices of protected commodities, the con- 
servation of the natural resources of the 
country, the growth of monopoly, etc. 

MilPs prepossession in favor of the 
deductive method may not unreasonably be 
attributed to the state of the natural 
sciences in his day. It certainly seemed at 
that time as if astronomy, the most ancient 
and dignified of the sciences, had reached 
the enviable position of commanding gen- 
eral principles, which enabled it to predict 
by means of deduction what would happen 
in particular cases. It was not unnatural 
to assume that the sister sciences would 
in succession enjoy a similar authority 

10 



THE ECONOMIC UTILIZATION OF HISTOEY 

and be able to promulgate, ex cathedra, a 
few general laws, from which details 
could be deduced. But the progress of 
science has taken a course which could 
hardly have been anticipated. Astronomy 
itself has been applying observation on 
a scale which could not have been imagined 
fifty or sixty years ago. The use of 
photography and of the spectrum analysis, 
in such studies of the composition of the 
sun as those which have been made by 
Dr. Hale and his colleagues in the Mount 
Wilson Observatory of the Carnegie Insti- 
tution of "Washington, have opened up 
entirely new fields of investigation and 
have given us facts of which deduction 
would be clearly incapable. Geology and 
zoology, which were formerly, in the main, 
sciences of observation, have become ex- 
perimental. The geologist no longer con- 
tents himself with observing the stratifi- 
cations of the earth's crust, and drawing 
conclusions from them. In the geophysical 
laboratory he actually fuses rocks and 
reproduces in his microcosm the process by 
which the earth's crust was formed. The 
zoologist is able, as in the Laboratory of 
Experimental Evolution of the Carnegie 

11 



TllM Ml'ONOMh^ II'IMLI'/ATION Ol-' IIIMTOlCV 

InisiUiidon, io sliidy (lie Inws ui' Uerediiy 
under oonlrolltMl condilionM. 

Such ('liMni;(\s ns (hese aro (loubllosH diic' 
to llie I'tK^I. Hint lli(* n[)[)nrnliiH of (>\[)(^ri- 
miMdnlioii has nllaiiu'd a ran,i;(* and jx^'foo- 
lioii ronnrrly unknown. Tlu^ niclhods l)y 
\\hi(^li (h(» ivical nuHlical disc'ovt'ric's of 
HHUMil years \\i\\c Iummi inadt' ai'c^ fainiliar 
illuslralioiis of this prt)i;rt\ss in our 
insi I'nintMds of obsiM-valioii. 

ir (Economics is (i) prolit by \\\o t'\nin[)l(> 
o\' iUo nalnral S(^iiMuu\s, il nnisl lake 
nccDunl o\' what th(\v ha\(* doni^ sinct* the 
days o\' .lohn Stuart Mill. lnsl(\a(l o\' 
ireaiini;- (hMluetiou as its t^oal, it must 
oonsidtM* it as ils starting' [H)int.\ 1)(mIuc- 
lion can uiuloubledly .i;i\e us certain i^'iMi- 
(>ral laws bast^l upon our inner eouKseiouB- 
iu»ss o[' nu>li\t\s and iiuf)uls(^s, !>ul these, 
by Iht^ir naturt\ must \h^ iXoi\cv:\\ and I ru(» 
in [)rof)orlion U> their \ a^uiMu^ss. 'Vhe 
next sti^p bt\vond dinluelion must b(^ 
dt\seription and observation, and tiiis 
phase has been am[)ly illustrated by the 
,i;rt\d eoni ributions Io our nu>noi;ra4)lii(^ 
liltM-aturt^ mad(* by (he liislorieal school 
in (^M'many, and by scholars in oHum* 
OOliiitrii^s who hav(* btuMi nu>rt^ or less 

Id 



THE BOONOMIO UTILIZATION OP HISTORY 

inspired by it. Puroiy doBcriptive work, 
however, whether hiBtorical or BtatinticaL, 
is not the goal of science. Our next step 
is to apply expen'mrintal mothodH, that is, 
not merely to dencribe, but firnt to analyze, 
and then to apply such methods as ttiat of 
concomitant variations, and to measure 
the results as far as they are capable of 
numerical expressiou. 

In claiming for economic phenomena the 
value which we attach to experi mentation, 
it should Ixi understood that wa aid not 
dealing with mere obsei'vation as applied 
by the geologist, or the astronomer, or the 
zoologist. Most economic experiments, 
though they may not be made with an 
avowed scientific purpose, are yet made on 
the basis of a definite theory, and the fact 
that this theory often enjoys the crjmplete 
confidence of the legislator does not alter 
the taet that it is in its essence experimen- 
tal, inasmuch as its results are prob- 
lematical. . The zoologist, who observes 
animals in a state of nature, studies varia- 
tions which occur without any referenoe 
to any theory that he may have in his mind. 
But in social phenomena, especially in 
modern countries, the variations are 

13 



THE ECONOMIC UTILIZATION OF HISTOEY 

always due to a deliberate purpose, and 
that purpose is generally based, either con- 
sciously or unconsciously, upon a certain 
social or economic theory. 

Francis Place, e.g., thought that the 
excesses of trade unions were due to the 
restrictions of the law and that, if these 
were removed, industrial peace would pre- 
vail. His agitation brought about the 
repeal of the English combination laws in 
1824, but the great increase in strikes 
and other disturbances which promptly 
followed, completely disproved his theory. 

Some thirty-five years ago many econo- 
mists thought that the alternating demand 
for gold and for silver which would result 
from international bimetallism would keep 
the ratio of exchange between the two 
metals constant. As the agreement neces- 
sary to such a policy could not be carried 
into effect, our country endeavored to 
raise the price of silver by increasing the 
governmental demand for it, and first the 
Allison Act of 1878 and then the Sherman 
Act of 1890 were passed with this theory 
in view. The steady fall in the price of 
silver, in spite of that demand, went far 
towards proving the limitations of the 

14 



THE ECONOMIC UTILIZATION OF HISTOEY 

bimetallic theory. The so-called ^^Anti- 
Trust Law'^ of the United States, which is 
being so much discussed at the present 
time, is based upon the theory, commonly 
accepted from Adam Smith down to the 
last quarter of the nineteenth century, that 
free competition is the best cure for the 
abuses of trade. Many are now reaching 
the conclusion that our experience with 
that law is showing up many important 
limitations upon that theory. 

Not only do economic experiments rest, 
as a rule, upon some hypothesis, but they 
often rest upon the theories of the econo- 
mists themselves, which, though they may 
be derided or ignored in the beginning, 
slowly filter from the text-books through 
the magazines and newspapers into the 
popular mind and influence public opinion, 
at times, in the next generationX The 
economist has at least one attribute of 
divinity in that his mills, like those of the 
gods, grind slowly. In 1882 Jevons wrote : 
^*If it can be shown by unquestionable 
statistics and unimpeachable evidence of 
scientific men that such working with 
phosphorus leads to a dreadful disease, 
easily preventable by a small change of 

15 



THE ECONOMIC UTILIZATION OF HISTOEY 

procedure, then I hold that the Legislature 
is prima facie justified in obliging the man 
to make this small change. The liberty of 
the subject is only the means towards an 
end; it is not itself the end.''^ But thirty 
years elapsed before the Congress of the 
United States passed the phosphorus bill, 
and even then prominent members of both 
parties opposed it, not on practical 
grounds, but for the purely abstract, 
pseudo -philosophical reasons referred to 
by Jevons. 

John Stuart Mill advocated taxing the 
unearned increment in the value of land 
as far back as 1848.® Though some Ger- 
man cities began to tax this increment in 
1905,^ and indeed, the same principle had 
been applied in the G-erman colony of 
Kiao Chau in 1898, many of Mill's country- 
men appeared to be quite unconscious of 
it, sixty years after he had enunciated it. 
Thus, when the parliamentary agitation 

7 W. Stanley Jevons : The State in Eelation to Labour, 
1882, pp. 12-13. 

8 First edition of Principles of Political Economy, Vol. 
II, 1848, p. 361. 

9 See article by Eobert C. Brooks on The German 
Imperial Tax on the Unearned Increment, Quart. Jour, 
of Economics, August, 1911, pp. 682-709. 

16 



THE ECONOMIC UTILIZATION OF HISTOKY 

began which led to the enactment of the 
law of 1910, the proposition impinged npon 
the Tory mind with the painful shock of a 
new idea. 



17 



CHAPTER II 

Some Questions of Methodology 

These illustrations of some of the topics 
to which the experimental method may be 
applied, suggest the desirability of answer- 
ing two more general and fundamental 
questions which lie at the very basis of all 
economic study. One is, What is the 
nature of the material with which the econ- 
omist has to deal! The other is. What 
kind of results should he try to obtain? 

As regards the first question, we should 
recognize that the material is not homo- 
geneous. Much confusion results from a 
failure to realize this fact. As hinted by 
Professor von Schmoller,^ our material is 
drawn from three distinct kingdoms. First 
of all, we have the human mind with its 
impulses and wants. This is the element 
emphasized by the deductive school. Then 
we have the physical world, or what we call 
in general nature, that world which we 

1 See his article : Volkswirtsehaf t, Volkswirtsehaf ts- 
lehre und -methode. Handworterbucli der Staatswissen- 
schaften, 3d edition, 1911, Vol. VIII, p. 457. 

18 



SOME QUESTIONS OF METHODOLOGY 

know by our sense impressions.^ Finally, 
we have the social organism, including 
laws, institutions, and customs, which we 
may be said to know partly through our 
inner consciousness, inasmuch as we our- 
selves participate in the social life about 
us and share the feelings of our fellow 
men, and partly by indirect sense impres- 
sions derived often through the medium of 
writers of books, or through oral tradition. 
In this case, the minds of other persons 
serve as the medium through which the 
facts of the outside social world reach us. 
This combination of factors may be illus- 
trated by almost any familiar economic 
phenomenon, such as a strike. In the great 
anthracite coal strike of 1902, the course 
of events was influenced not only by the 
simpler economic impulses, such as the 
desire of the miners to get as much as pos- 
sible, and of the employers to pay as little 
as possible. It was also conditioned by 
purely geological data, such as the thick- 
ness and dip of the seams of coal, which 
determined different methods of payment 
in different parts of the coal fields. 

2 See Karl Pearson: The Grammar of Science, 3d 
edition, 1911, Chap. II. 

19 



THE ECONOMIC UTILIZATION OF HISTOEY 

Finally, it was influenced by social institu- 
tions such as the trade union with its dis- 
cipline and its traditions, by the joint stock 
company with its legal rights and inner 
organization, by the law of the land, which 
forbade violence, by the press, and by 
the moral pressure of the commission 
appointed by the President, etc. 

Now it is clear that, while economists 
have to study the resultant of a combina- 
tion of three elements, each of them is sub- 
ject to influences of its own. The psychical 
element is influenced by education, by reli- 
gion, by race, etc. The material world is 
influenced by geological processes, by the 
seasons, by the operation of evolutionary 
forces, etc. The social world is influenced 
by laws, by diplomatic and military events, 
in short, by what we call history. The 
economist must, therefore, look for uni- 
formity, not so much in the general 
result as in the individual elements which 
enter in to make that result. .He is, in a 
sense, like the meteorologist, who has to 
study that familiar but very complex 
phenomenon which we call the weather. 
This obviously depends upon a number of 
entirely distinct things. It depends pri- 

30 



SOME QUESTIONS OF METHODOLOGY 

marily upon the position of the earth with 
reference to the snn, but, beyond this 
fundamental astronomical fact, we also 
have the complicated physical and chemi- 
cal conditions on which depend the density 
of the atmosphere, the movements of the 
air, the temperature, the currents of the 
ocean, and other things. Now it is futile to 
expect to predict the weather of any day 
from the weather of the past, excepting as 
we may indulge in such obvious prognosti- 
cations as that it will be hot in summer and 
cold in winter. But the meteorologist 
knows the tendency of each of the elements 
taken separately, and by studying their 
combination at a given time he may pre- 
dict with a fair degree of approximation 
what the weather is likely to be in the 
immediate future. 

What kind of results are we as scientific 
economists to aim at in our study of this 
material? It may be best to approach this 
subject by first asking what we do not aim 
at. If economics is a science, we are not 
content with mere description of economic 
processes, however great the utility of 
description as a preliminary phase of our 
work may be. Nor can we stop at the nar- 

21 



THE ECONOMIC UTILIZATION OF HISTOEY 

ration of economic events, or at a classifi- 
cation of economic elements, or even at 
their statistical enumeration. Our aim is 
to obtain those generalizations commonly 
called scientific laws. According to a 
recent English writer on this subject, law 
in the scientific sense is a ^'description in 
mental shorthand of as wide a range as 
possible of the sequences of our sense- 
impressions.''^ Practically the same idea 
is expressed by a recent German author 
with special reference to economics, when 
he says, that the task of the economist is 
^'Beschreiben unseres Systemes und seiner 

Bewegungstendenzen Die Satze, 

aus denen die Beschreibung besteht, nen- 
nen wir dann ' okonomische Gesetze. ' ' '* 

Both of these authors imply that we are 
concerned with changing, not stationary, 
phenomena. ''It deserves special note,'' 
says Pearson, "that the sequences with 
which we are dealing are all reducible to 
descriptions of motion, or of change."^ 
We must, therefore, distinguish scientific 

3 Karl Pearson, 1. c, Chap. IV, p. 112. 

4 J. Schumpeter : Das Wesen und der Hauptinhalt der 
theoretischen Nationalokonomie, 1908, p. 29. 

5 1. c, p. 133. 



SOME QUESTIONS OF METHODOLOGY 

laws from so-called statistical laws, such 
as ''Engel's law'' regarding the items of 
expense in family budgets. These differ 
from scientific laws in that they record, 
as far as they really do record the truth, 
a state of things and not a sequence/' 

We must also distinguish between eco- 
nomic laws and so-called historical laws. 
These, to be sure, record changes, but they 
deal with such a complex mass of events 
that any exact duplication of them is in 
a high degree improbable and, indeed, has 
never been experienced. At best, we may 
postulate certain general and indefinite 
tendencies such as that expressed by 
Aristotle in his famous cycle of govern- 
mental changes. In order to obtain scien- 
tific laws, that is to say, sequences which 
shall have any high degree of uniformity, 
we must isolate our factors and consider by 
themselves the sequences which apply to 
each one. We must thus eliminate, either 
by actual experiment or by the application 
of the scientific imagination, the many 
other factors which, when combined, con- 
stitute the phenomena as they present 
themselves to us in real life. 

6 On statistical law compare von Sclunoller, 1. c, p. 485. 



THE ECONOMIC UTILIZATION OF HISTOEY 

The analysis of phenomena is particu- 
larly important in economics, on account 
of the difference in the three principal 
elements which, as explained above, enter 
into our field of study, and the unequal 
part which they play in its different divi- 
sions. Though all three occur in combina- 
tion in practically all of the different topics 
commonly treated in a text-book of eco- 
nomics, it seems as if the material world 
and its laws were particularly prominent 
in the subject of production. The law of 
diminishing returns, e.g., is a factor of 
nature rather than of the mind of man."" 
The social element, on the other hand, 
determines to a large extent the distribu- 
tion of wealth. For instance, the legal 
status of labor, the legal privileges of, or 
restrictions on, capital, the system of land 
tenure, the incidence of taxation, etc., all 
play a prominent part in distribution. In 
consumption, finally, the will of man seems 
to be the important factor. Whether, e.g., 
a nation will spend its surplus income on 
liquors and tobacco, or on jewelry and 
fine clothes, or on houses, or on babies, will 

7 See von SchmoUer, 1. c, p. 485. 
24 



SOME QUESTIONS OF METHODOLOGY 

depend upon its psychology, thougli this 
may be affected secondarily by environ- 
ment and social institutions. 

There is ample opportunity for the appli- 
cation of the experimental method in 
studying all of these standard subjects in 
economics. But there is one topic to which 
no other method can be successfully 
applied. I refer to what we may call 
economic pathology. This may be defined 
as a condition in which organs are dis- 
eased, that is to say, in which they fail to 
perform their normal functions. Now in 
economics this may mean: (1) Some form 
of human degeneracy, which in turn may 
be either physical or mental. Examples of 
the former are disease, sterility, physical 
weakness. Examples of the latter are 
indolence, dishonesty, immorality, drug 
habits. (2) A pathological state of our 
economic system may result from the defi- 
ciencies of nature, such as the exhaustion 
of the soil or other natural resources, the 
denudation of woodlands, the lack of rain- 
fall. These are sometimes the results of 
bad legal institutions, and therefore in- 
directly caused by man, but they are 
primarily physical, and in many cases, as 

25 



THE ECONOMIC UTILIZATION OF HISTOEY 

in changes in humidity, they seem to be 
attributable mainly to physical causes. 
(3) The disease may be in the social 
system. China, e.g., has vast unused 
resources, and an intelligent, industrious 
population, but bad government has re- 
tarded the utilization of its powers. 

Now mere generalization with regard to 
the economic man gives us no help in study- 
ing economic pathology. We must get 
our facts at first hand. We cannot draw 
from our inner consciousness the causes 
of economic disease, any more than we can 
discover by metaphysics the microbes that 
infest the human body. 

The idea of economic experimentation 
is not in itself new. Newmarch referred 
to it in his address as president of Section 
F of the British Association for the 
Advancement of Science as long ago as 
1861,^ and actually claimed that economics 
had then reached the experimental stage. 
Jevons, in 1880, wrote an essay on ^'Ex- 
perimental Legislation and the Drink 

8 Journal of the Eoyal Statistical Society, December, 
1861, pp. 451-467. See quotation from Newmarch 's 
address, given by Henry Ludwell Moore: Laws of Wages, 
1911, p. 170. 



SOME QUESTIONS OF METHODOLOGY 

Traffic/' in which he advocated the enact- 
ment of laws applicable to limited areas 
only for the express purpose of testing 
them.^ Similar views were expressed by 
him in his book on ^ * The State in Eelation 
to Labour.'' Professor Ely, after quoting 
the plan of Jevons just referred to, stated 
that the German historical school * * claimed 
that the whole life of the world had neces- 
sarily been a series of grand economic 
experiments, which, having been described 
with more or less accuracy and complete- 
ness, it was possible to examine. ' '^^ 

A decade later Keynes conceded the pos- 
sibility in certain cases of economic experi- 
mentation;^^ and still more recently Pro- 
fessor von SchmoUer, an economist who 
combines in a rare degree philosophical 
training, historical knowledge, practical 
experience in legislation, and familiarity 

9 This essay was originally printed in the Contem- 
porary Eeview, for February, 1880. It was reprinted ia 
Methods of Social Eeform, 1883, pp. 253-276. 

lOEichard T. Ely: The Past and Present of Political 
Economy, Johns Hopkins University Studies, Series 2, 
No. 3, 1884, p. 45. 

11 John Neville Keynes : The Scope and Method of 
Political Economy, 2d edition, 1897, pp. 188-190, and 
275-279. 

27 



THE ECONOMIC UTILIZATION OF HISTOEY 

with economic literature, in summarizing 
the latest conclusions of a long life, 
has expressed his general concurrence in 
these views of Keynes.^^ Nor is it un- 
common in more popular writings to find 
legislation referred to as experimental. 
The Hon. Samuel W. McCall, e.g., in a 
recent article says that the people of 
Oregon ^^are heroically subjecting them- 
selves to political vivisection in the testing 
of governmental experiments."^^ 

We seem to be confronted here with a 
case in which the same word is used by 
different authors with quite different con- 
notations. Newmarch, Jevons, and Con- 
gressman McCall were apparently think- 
ing of experiments in social policy, more 
particularly in certain forms of social 
legislation, rather than experiments de- 
signed to test or discover general economic 
laws, and it is significant that Jevons' most 
original contribution to economic science 
lay in the field of economic abstraction. 
The point of view of the early writers of 
the Grerman historic school seems to differ 

12 See article Volkswirtschaft, Handworterbueh der 
Staatswissenschaften, 3d edition, Vol. VIII, p. 480. 

13 Atlantic Monthly, October, 1911, p. 459. 

38 



SOME QUESTIONS OF METHODOLOGY 

even more widely from that which is pre- 
sented here. Many of them not only did 
not expect to discover general economic 
laws by the historical method, but denied 
that such laws existed. The aim of Knies, 
who is commonly considered the founder of 
this school, seems to have been rather to 
trace laws of historical development, while 
Eoscher, one of its most prolific and widely 
read representatives, used history more 
for the purpose of illustration than of 
proof. It may be said in general that the 
vast and valuable monographic literature 
brought into existence during the past half 
century under the stimulus of this school 
of thought emphasizes the historical rather 
than the theoretical element. As Professor 
Amonn says : 

Die methodisch-kritischen Ansichten der his- 
torischen Schule in. bezug auf den logischen 
Charakter einer Wissenschaft von der Yolks- 
wirtschaft fiihren in ihren extremen Formiilier- 
ungen und deren letzten Konsequenzen zu einer 
voUigen Negation der theoretischen National- 
okonomie und zur Proklamierung der Allein- 
berechtignng einer reia historischen Betrach- 
tungsweise, d. h. es wird geleugnet, dass es ein 
theoretisches Erkenntnisobjekt in bezug auf die 
Volkswirtschaft iiberhaupt geben konne, und 

29 



THE ECONOMIC UTILIZATION OF HISTOEY 

lediglich ein solches mit historischem Charakter 
anerkannt.^* 

Similarly a recent French author, in 
referring to the publications of the histori- 
cal school, says : 

Les institutions du moyen age et de I'anti- 
quite, les doctrines anciennes, I'histoire sociale, 
la statistique, la description de I'organization 
economique des nations modernes forment I'ob- 
jet essentiel de ces travaux. L 'economic politi- 
que est comme fondue ou noyee dans 1 'etude des 
institutions et dans I'histoire economique.^^ 

Keynes and von SchmoUer seem to refer 
to the experimental method as a means of 
obtaining scientific laws more in the sense 
of this essay, but to treat it as on the whole 
exceptional and limited in its scope. 

Within recent years, however, not a few 
authors have begun to apply, each in his 
own field, the method here advocated. 
Mathematical processes and notation are 
used by many of them, such as Professor 
Irving Fisher, Professor H. L. Moore, and 

14 Alfred Amonn: Objekt und Grundbegriffe der 
Theoretischen Nationalokonomie, Wiener Staatswissen- 
schaftliche Studien, 10 Band, Erstes Heft, 1911, p. 44. 

15 Charles Eist in Gide et Eist : Histoire des doctrines 
6eonomiques depuis les Physiocrates jusqu'a nos jours, 
1909, p. 446. 

30 



SOME QUESTIONS OF METHODOLOGY 

the group of Italian economists referred to 
by him in his Laws of Wages.^^ That 
a similar method may be used without 
mathematical apparatus and in a more 
strictly historical subject, is shown by Dr. 
Woods, who has even invented the term 
^'historiometry'^ to designate it/^ / The 
purpose of the present study is to empha- 
size three considerations. 

1. The need of a systematic and con- 
certed extension of this method. It in- 
volves collecting a large number of data in 
order to distill from them a few generali- 
zations. The individual investigator is 
usually able to command but a limited field, 
and even then is often obliged to draw his 
material from different places and periods 
with loss of accuracy in his conclusions. 
We need more team work. We need a 
closer co-operation between the universi- 
ties, the governments, and the various soci- 
eties and institutions devoted to economic 
research. In short, we need the principles 

16 1. c, pp. 173, 174. 

17 See Frederick Adams Woods : Mental and Moral 
Heredity in Eoyalty, 1906. A New Name for a New 
Science, Science, November 19, 1909; Historiometry as 
an Exact Science, Science, April 19, 1911. 

31 



THE ECONOMIC UTILIZATION OF HISTORY 

of '^scientific management applied to 
economic science. 

2. The scientific value of historical 
facts, even when they are not expressed 
statistically.' .Mathematicians have hither- 
to been the most effective exponents of the 
experimental method, and our ideal must 
be to express in numerical form the gen- 
eralizations of economics, since no ''short 
hand,'' to use Professor Pearson's expres- 
sion, is so concise and so precise as that of 
mathematics. At the same time it is only 
within a very recent historical period that 
we have had any extensive body of sta- 
tistics to draw upon, and even now it must 
be conceded that this handmaiden of 
science has been known to do her work in 
a slovenly fashion and to make a show of 
perfection hardly warranted by the reality. 
In undue reliance upon inaccurate figures 
even mathematicians are tempted to push 
the refinement of their formulae beyond the 
accuracy of their data. We need to bridge 
over the gap between the history of the 
past with its broad but fairly well-authen- 
ticated facts, and the statistics of the 
present with their elaborate but often 
confusing and misleading detail. 

33 



SOME QUESTIONS OF METHODOLOGY 

3. The importance of utilizing the great 
amount of economic material contained in 
the history of our own country. An 
attempt will be made in the following 
chapter to point out some of the peculiar 
advantages afforded by the United States 
for this kind of research. 



CHAPTER III 

Economic Experimentation in the United 
States 

One of the most salient facts in the early- 
history of the United States is the great 
importance of, and the attention paid to, 
economic interests. Such interests are 
potent in the history of all nations, but if 
we compare our country with Europe since 
the Middle Ages, we must recognize that 
there are two forces very prominent in 
determining the history of Europe, which 
were absent from our country. One is 
dynastic ambition, which could not exist in 
a country without kings or princes. The 
other is religious zeal. It is true that the 
desire to worship God in their own way led 
the Pilgrims first to settle in New England, 
but it is fair to say that we have never had 
in our country those great disturbances 
which have been caused by the wars of reli- 
gion in Europe. Thus in the very nature 
of the case economic considerations were 
predominant. 

34 



EXPEBIMENTATIOX EST THE UNITED STATES 

Anotlier fa/ctor entering into European 
higtorr, tkongii it has existed in our coun- 
trr, has also played a mncii less important 
part. I refer to racial prejudice. It is 
true tiiat we have not been free from this 
curse, but fortunately we have been tinis 
far spared wars of races and great racial 
antagonisms, such as are constantly ariB- 
ing to pit the Teuton against the Latin or 
the Slav or the Magyar in Europe. 

Economic forces have had a wonderfully 
free play in our country on account of its 
newness and the consequent absence of 
institutions and traditions which resist a 
change in older communities. Hence if we 
look at many of our early laws, such as the 
Massachusetts Body of Liberties, we shall 
see tiiat ihey 6e]ibeTaieiy nda^ eertsmx 
ecommne idesibi whaA ihej endeavor to 
make tlie role of oondnet in tlie eomsmm- 
wealtlL 

In New Kngiawd generally fendal land 
tenure wefe avowedly diseaurded in favor 
of iiie mapler frenhoUL T1%e mie of pri- 
mog^antore was abandoned, and instead a 
system was adopted nnder wliieii, in ea^ 
ol intestacy, Ike land was divided airozig 
tlie ddldrieD, tibe oldest in 



THE ECONOMIC UTILIZATION OF HISTOEY 

merely having a double portion. As 
clearly stated by Governor Talcott, this 
was done in order to encourage the 
younger sons to stay upon the land and 
cultivate it/ 

If economic questions were prominent in 
the settlement of our country, they have 
gained in prominence throughout our de- 
velopment. Most of our political questions 
have turned upon economic interests or 
economic ideals. I need but refer to the 
slavery question with its many ramifica- 
tions and complications, resulting in the 
Missouri Compromise, the Fugitive Slave 
Law, the Compromise of 1850, and the Civil 
War, or consider the debates about the 
United States Bank, the endless contro- 
versies about the tariff, the currency, the 
public lands, and, more recently, regarding 
immigration, the organization of labor, and 
the regulation of corporations, to show 
what an important part economic questions 
have played in our internal development. 

Other countries have, it is true, their 
own economic problems which they are 
trying to solve by legislation. But the 

1 C. M. Andrews : The Connecticut Intestacy Law, Yale 
Beview, November, 1894, p. 268. 

36 



EXPEEIMENTATION IN THE UNITED STATES 

United States has the transcendent advan- 
tage as an experiment station of being 
composed of a group of States, each of 
which legislates npon a very large range 
of topics. To a certain extent it shares 
this peculiarity with other modern federal 
states, whose constitutions are more or less 
modelled upon ours, such as the Swiss 
Eepublic, the German Empire, Canada, the 
Australian and South African common- 
wealths. But we have the advantage over 
the British colonies of a longer history, 
and over the European nations of fewer 
historical institutions and racial antago- 
nisms, which interfere with the strictly 
economic effects, while, as compared with 
any one of these states, we have the advan- 
tage of a larger number of units and there- 
fore of a broader application of the method 
of differences. Thus we have in the frame- 
work of our government the very condi- 
tions which Jevons would have introduced 
into England, in order to test experimen- 
tally the operation of different kinds of 
liquor laws.^ Economically our country 
may be likened to a hospital with fifty 
general wards, each under separate medi- 

2 Jevons : Methods of Social Eef orm, p. 265. 
37 



THE ECONOMIC UTILIZATION OF HISTORY 

cal direction, and a large central ward for 
certain selected cases, while a number of 
outlying pavilions and annexes under still 
different systems are loosely connected 
with the central institution. What an 
opportunity this offers the economist who 
will carefully study the results of the dif- 
ferent kinds of treatment ! 

It is not only in official experimentation 
through legislation and administration 
that our country is rich. It has also been 
the happy hunting-ground of social Uto- 
pias. In many cases it has been their 
burying-ground as well. Many of these 
communities, such as the Mormons, the 
Shakers, the Perfectionists, etc., have had 
a religious or moral ideal. Others, like 
Brook Farm, New Harmony, the short- 
lived Ruskin Colony, the Fairview Colony 
of Single Taxers, have been based upon 
social or economic ideals. Each of these 
communities represents on a small scale a 
voluntary experiment in some department 
of economics. The ease with which such 
Utopias spring up in our country is illus- 
trated by the fact that within two years of 
the publication of Looking Backwards 
more than 50 Bellamy Clubs with a mem- 

38 



EXPEEIMENTATION IN THE UNITED STATES 

bership of about 3,000 are said to have been 
established in California alone.^ 

The organization of ideal communities, 
which was so popular in the first part of 
the nineteenth century, seems to be suc- 
ceeded in the first part of the twentieth 
century by an equally enthusiastic activity 
in the formation of societies designed to 
promote some reform in our public policy. 
Some of them relate to taxation, some to 
the regulation of the liquor traffic, some to 
labor legislation, some to conservation, 
some to land tenure. Each one is a stimu- 
lus, urging the legislatures to test by actual 
experiment the ideas for which they stand. 

Apart from the idealists, we have a 
great mass of experiments tried in the 
self-interest of those who themselves are 
engaged in production. Our business men 
and lawyers have been peculiarly ingenious 
in evolving new forms of industrial organi- 
zation. Our public service corporations 
are testing new methods of adjusting their 
charges, until the study of rates has become 
almost a science by itself.* 

3 Ira B. Cross : Co-operation in California, American 
Economic Beview, September, 1911, p. 536. 

4 J. Maurice Clark : Eates for Public Utilities, Ameri- 
can Economic Beview, September, 1911, pp. 473-487. 

39 



THE ECONOMIC UTILIZATION OF HISTOEY 

Likewise the wage receivers are trying 
all kinds of methods of improving their 
own condition. Every strike may be said to 
represent an experiment relating directly 
to the important question of economic 
theory : what determines the rate of wages. 

In all of this experimentation we have 
the great advantage in our country of 
carrying it on under conditions described 
by that favorite phrase of the economist, 
^^ other things being equal.'' By this I do 
not mean that we have been able to try 
different things under absolutely identical 
conditions, such as might be created in a 
laboratory, but, as compared with the con- 
ditions under which economic history has 
developed in other parts of the world, we 
may claini for our own country that these 
experiments have been conducted under 
three exceptionally favorable conditions : 

1. They fall within a limited period, so 
that no great or fundamental changes have 
taken place in the cultural standards of 
civilization or the mores of the people 
such as characterized the change from the 
mediaeval to the modern period in Europe. 

2. The experiments have been carried 
on within an area of political uniformity, 

40 



EXPEEIMENTATION IN THE UNITED STATES 

SO that, although there are great differ- 
ences in latitude and longitude, climate and 
soil, between the different parts of our 
country, yet the general legal and social 
environment is very nearly the same. 

3. These experiments have been carried 
on among a people, which, if not homo- 
geneous in its ethnic makeup, is at least 
remarkably uniform in its heterogeneity. 
Our country is like a good mince pie ; any 
one slice contains many ingredients, yet 
specimens from different parts of the 
whole are made up of nearly the same ele- 
ments, varying mainly in their relative 
prominence. Thus everywhere we have 
the common basis of the English language 
and, with the exception of Louisiana, of 
English law. Everywhere too, we have a 
greater or less admixture of different 
European races, of Africans, and occa- 
sionally of Mongolians. While, of course, 
the percentage of the different races varies 
widely in different parts of the country, it 
cannot be said that any one race except 
the Anglo-Saxon exerts in any section a 
purely racial predominance upon our 
institutions.^ Even in the South, in com- 

5 The word Anglo-Saxon is to be taken in its broadest 
41 



THE ECONOMIC UTILIZATION OF HISTOEY 

munities in which the blacks outnumber 
the whites twenty-seven to one, the insti- 
tutions are essentially Anglo-Saxon and 
not African. While, therefore, we have not 
the absolute control over our conditions 
that is enjoyed by the chemist, and while 
the elements are vastly more complicated 
than those entering into the ordinary labo- 
ratory experiment, we have conditions 
relatively favorable for obtaining good 
results. 

The temptation is strong to enumerate, 
at least in part, some of the many fields of 
economic experimentation which are to be 
found in the history of the United States, 
but to do so at length would expand a 
chapter into a monograph and is, there- 
fore, out of the question. Some of these 
departments of study, such as those relat- 
ing to currency, to prices, to the rate of 
interest, have already yielded valuable 
results to the investigator. Some of the 
more practical questions, such as those 
relating to land tenure and the methods of 
agriculture, as well as the purely govern- 

sense to cover the whole Low German stock, without any 
reference to the relative strength of the English and 
Dutch element in New England institutions. 



EXPEEIMENTATION IN THE UNITED STATES 

mental questions involved in taxation and 
the management of public debt, still remain 
to be studied intensively, in spite of a con- 
siderable amount of work already put upon 
them. Less, on the whole, has been done 
with the problems relating to labor, 
methods of remuneration, the rates of 
wages, the efficiency of labor, etc. We have 
tried many experiments in this department 
of economics. We have had free labor, 
indentured labor, and complete slavery. 
We have made a sudden transition from 
slavery to freedom, so sudden as to bring 
with it many undesirable results, but per- 
haps for that reason the more interesting 
as an economic experiment. In the appli- 
cation of free labor we have likewise had 
experiences of great value. We have had 
labor both organized and unorganized, 
native-born and foreign, and we have had 
trade unions of many types and represent- 
ing many stages of development. We have 
tried many systems of wages. We have 
developed, particularly in the South, vari- 
ous methods of applying labor to land, 
which represent gradations ranging from 
free tenancy to a system verging on 
peonage. 

43 



THE ECONOMIC UTILIZATION OF HISTOEY 

Though considerable attention has been 
given to this topic, many of its compli- 
cated problems have been barely touched 
upon. The economist often inquires about 
the effect of labor on production, but he 
seldom asks, ^^What is the reaction of 
wealth upon the efficiency of labor?" 

According to the observations made by 
Mr. Frederick W. Taylor, it does not pay 
to increase wages too rapidly. Indeed, he 
has endeavored to give a mathematical 
expression to the possible rate of economi- 
cal increase and says that, if wages are 
increased up to 60 per cent beyond the 
wages usually paid, this increase tends to 
make the men more thrifty and better in 
every way, but that, when the rate goes 
beyond 60 per cent, many of them tend to 
work irregularly and to become more or 
less shiftless, extravagant, and dissipated.^ 

Economists have done little in the study 
of this phase of the labor problem, since 
Eicardo laid down the pessimistic view 
that the population tends to increase with 
an increase in wages. Yet it is a common- 
place that, while an efficient population 

6 See F. W. Taylor : The Principles of Scientific Man- 
agement, 1911, p. 74. 

44 



EXPEEIMENTATION IN THE UNITED STATES 

may be seriously handicapped by the 
•^niggardliness of nature,'' a country with 
large natural resources may be likewise 
held back, because the inhabitants either 
will not or can not utilize them, or because 
they do not apply sufficient intelligence and 
energy in international competition. 

It is a matter of common observation 
that wealthy families in our country often 
contain a number of parasitic members, 
that is, members who derive a large income 
from society without rendering any appre- 
ciable economic or public service in return. 

Mr. Andrew Carnegie gives expression 
to a common view when he says : ^ ' There is 
nothing so enervating, nothing so deadly 
in its effects upon the qualities which lead 
to the highest achievement, moral or intel- 
lectual, as hereditary wealth."^ But we 
have no figures to tell us with any accuracy 
how numerous these drones are, or what 
proportion they bear to the more useful 
members of the same families. It seems 
very probable that the public have an 
exaggerated notion of their vices, because, 
as Dr. Woods points out, ^Hhe vices of the 

7 Andrew Carnegie : The Empire of Business, 1902, 
p. 126. 

45 



THE ECONOMIC UTILIZATION OF HISTOEY 

aristocracy are always made the most of 
by the polychrome daily press, ''^ and in 
the absence of an aristocracy, multimil- 
lionaires furnish good copy. But even 
granting that we know a little of their 
moral shortcomings, we know practically 
nothing of their economic efficiency. Little 
account is made on the one hand of the 
many men and women of means who live 
conscientious, industrious lives, devoting 
themselves to some form of production or 
of public service ; or, on the other hand, of 
those whose energies are dulled by the pos- 
session of a competency, and who, without 
being actually vicious, are mere ciphers as 
far as any economic usefulness is con- 
cerned. Yet we ought to have reliable 
facts, if we are to judge correctly of the 
reaction of prosperity on the human mind, 
and of the conditions which determine it. 
Intensive studies of heredity in families, 
such as those made by Sir Francis Gralton 
in England and Dr. Frederick A. Woods 
and Dr. C. B. Davenport in our country, 
are of great value, but need to be supple- 
mented by a study of the economic re- 

8 1. c, p. 261. 

46 



EXPEEIMENTATION IN THE UNITED STATES 

actions. In the case of animal life, the 
inherited characteristics are all-important, 
and the breeder can reasonably expect to 
utilize the good qualities of the parent in 
the offspring. But if cows had the power 
to deliberately choose a life of celibacy, we 
should find many a pedigreed Guernsey, 
with ancestors in the advanced register, 
chewing her cud in idleness on the hillside 
and yielding no milk whatsoever, just as we 
often find sons of distinguished parents 
displaying real ability, when put to some 
academic test, and yet, for lack of proper 
incentive, doing nothing to make their 
lives either useful or distinguished. 

Our country should give exceptional 
facilities for studying parasitism in the 
*• leisure class,'' because here wealth is not 
subject to the social pressure of the feudal 
system, inherited in the older countries of 
Europe from the time when wealth meant 
land ownership, and land ownership of 
necessity involved public duties. Many of 
this class walk our streets, eloquent 
but unconscious arguments for socialism, 
terrible examples for the moralist, living 
texts for sermons, rich material for the 
problem novelist, but still comparatively 

47 



THE ECONOMIC UTILIZATION OF HISTOEY 

neglected by the economist, the sociologist, 
and the statistician. We gather the 
budgets of working men but not of club 
men; we collect the statistics of involun- 
tary unemployment but not of voluntary 
idleness ; our study of social conditions on 
the East Side has not been extended to the 
West Side. Yet it is obviously of the great- 
est importance to a nation, as it is to a 
cattle breeder, to reproduce and utilize the 
strong and dominant types, and we must 
know why so many of these members be- 
come atrophied, if we would understand 
the causes of national decadence, the great 
and perennial question of history as well 
as of practical politics. 

Parasitism is, however, but a part of the 
general subject of economic pathology, 
which has been altogether too much neg- 
lected by economists in the past. Or, if 
we pass beyond the strictly economic ques- 
tions to those broader questions of social 
policy, what vast materials have we in our 
country bearing upon the mixture of races. 
What a splendid opportunity to test the 
theories of the philosophical anarchist, 
who holds that the ills of society are due to 
the law, and who may study in the history 

48 



EXPEEIMENTATION IN THE UNITED STATES 

of Alaska the effect of allowing a common- 
wealth to grow up almost without law. 

It is not necessary, in this brief survey 
of the opportunities which our country 
offers for economic induction, to make an 
elaborate enumeration of topics or to show 
in detail how the material may be secured. 
Attention should, however, be called in 
fairness to some of the defects in condi- 
tions which make laboratory methods 
difficult, and which must be taken into 
consideration before any piece of work is 
undertaken. 

In the United States experimentation is 
constantly interrupted by the power of our 
courts to nullify laws. Thus experiments 
may be overthrown on grounds which are 
quite extraneous to their essence. It is as 
if a biologist were to suddenly find his 
laboratory invaded and wrecked by an 
over-zealous anti-vivisectionist. 

The economist has the further disadvan- 
tage that the subjects of his study and 
experiment are men like unto himself, with 
opinions, emotions, and voices. Hence 
every experiment is accompanied by a 
babel of sound, which seems to confuse the 
whole subject. The physiologist, working 

49 



THE ECONOMIC UTILIZATION OF HISTOEY 

in his quiet laboratory, is apt to think 
the very subject-matter of economics ill 
adapted to scientific study. If the human 
body were the seat of a republic in which 
all of the microbes that infest it and the 
ferments that endanger it were vocal, the 
investigator would have to put wax in his 
ears to keep his mind free from disturb- 
ance. Imagine the bacilli of consumption 
and of typhoid holding periodical elections' 
to see which should for the next four years 
control the state of health of the patient, 
with a lot of insurgents in the shape of 
pyaemia and dyspepsia striving, if not to 
govern, at least to hold the balance of 
power ! 

Another equally serious defect lies in the 
inadequacy of our records. The amount 
of economic material buried in the archives 
of our States is enormous. The material 
buried in the records of corporations, of 
labor unions, of voluntary societies, may 
be even greater. The mere index of State 
economic documents which is being com- 
piled for the Carnegie Institution of Wash- 
ington fills a portly quarto for each one of 
the older States. The cream of contempo- 
rary evidence available for the Docu- 

50 



EXPEEIMENTATION IN THE UNITED STATES 

mentary History of American Industrial 
Society, recently published by Professor 
Commons and his collaborators, fills eleven 
volumes. But in spite of this vast material, 
we still have to contend with the imperfec- 
tion of many of our records and with the 
difficulty of accurate mensuration. Profes- 
sor Dewey, in his able presidential address 
delivered before the American Economic 
Association in 1909, enlarged upon the 
inaccuracies of economic observation, and 
all serious economists must recognize the 
truth of what he then said. But it is the 
task of the economist to overcome diffi- 
culties, not to shrink from them, and he can 
best do this by helping his successors to 
obtain a trustworthiness in their material 
which is not always available for him. It 
is encouraging that the Federal authorities, 
and the State governments as well, are 
relying more and more upon trained econo- 
mists to record economic facts in the form 
of statistical or monographic studies. But 
we should remember that such studies are 
not the only output of a governmental kind 
to which we must turn. Every law affect- 
ing economic relations must be treated as 
an experiment, the recording of whose 

51 



THE ECONOMIC UTILIZATION OF HISTOEY 

results should be provided for in the law 
itself. How much futile discussion and 
how many errors would be avoided, if we 
were able from year to year to put our 
hands on the results of the operation of 
laws bearing upon economic relations! 
Just as modern hospitals not only provide 
physicians and nurses but also laboratories 
and records, so every legislature should 
have its economic annex, in which not 
merely the text of laws but also their 
results may be made available both for the 
legislature and for the student. 

The conception of history as an economic 
laboratory is quite different from the 
common conception of economic history. 
History is in the main descriptive. It seeks 
to give us a picture of the past. If it goes 
beyond that, it seldom attempts more than 
to trace general causes, or to lay down a 
philosophy of history or a theory of his- 
torical evolution. The economic utilization 
of history is almost the antithesis of the 
economic interpretation of history, since 
the latter is seeking a law of history and 
the former, laws of economics. The econo- 
mist undoubtedly owes a debt of gratitude 
to historians, and particularly to economic 



EXPEEIMENTATION IN THE UNITED STATES 

historians, for the material which they 
have put at his disposal, and the brilliant 
address on ^^ Social Forces in American 
History,'' delivered in 1910 by the presi- 
dent of the American Historical Associa- 
tion, is an indication of the increasing 
interest which historians are taking in 
social and economic elements. The con- 
trast, however, between their point of view 
and the economic point of view cannot be 
better illustrated than by quoting from 
this address. Professor Turner says that 
he has undertaken his survey for two pur- 
poses : ' ' First, because it has seemed fitting 
to emphasize the significance of American 
development since the passing of the fron- 
tier, and, second, because in the observa- 
tion of present conditions we may find 
assistance in our study of the past. ' '® The 
economist, while fully appreciating the 
value and the necessity of studying history 
from this point of view, must yet go a step 
further and must use the records of the 
past as a means of disclosing the operation 
of economic forces. 

9 Frederick J. Turner: Social Forces in American 
History, American Historical Beview, Vol. XVI, No. 6., 
p. 225. 

53 



THE ECONOMIC UTILIZATION OF HISTOEY 

The difference between description and 
science may be illustrated by an example 
taken from the history of physics. The 
lamp hanging in the cathedral of Pisa 
might be described in every artistic detail 
by a traveler. The history of the designer 
and the story of its construction might be 
told in full, without adding in the least to 
our knowledge of physics. It took the 
mind of a Galileo, at once analytical and 
constructive, to recognize in the apparently 
meaningless oscillations of the lamp a con- 
stantly acting force, and thus to discover 
the law of the pendulum. So the economist 
must recognize beneath the events of 
history the constantly acting economic 
impulses in the mind of man. 

This view of economic history as a 
series of experiments is not in conflict with 
the evolutionary conception of history. 
Indeed, it is really necessary to explain it 
rationally, for, unless we are willing to 
accept a blind fatalism, according to which 
history moves on without being controlled 
by human volition, we must recognize that 
what seems to us the orderly development 
of institutions is rational and orderly, pre- 
cisely because men have been constantly 

54 



EXPEEIMENTATION IN THE UNITED STATES 

trying new expedients and have deliber- 
ately retained those institutions and prac- 
tices which stand the test of experience. 
The very expression, ^'survival of the 
fittest," implies in human history a con- 
stant testing of new variants, as it does in 
the animal world, with this difference, 
however, that in the animal world the 
changes are brought about by the so-called 
forces of nature, which is another way 
of saying that, like Topsy, ^Hhey just 
growed,'' while in history most of the 
changes have been produced by a conscious 
effort of the human mind to bring about 
results. This is none the less true, because 
few individuals at the time have a suffi- 
ciently broad grasp of what is happening 
and a sufficiently profound knowledge 
of the world to know whither they are 
tending. 

Economic science, after a period of 
public favor in which its generalizations 
enjoyed considerable confidence, seems to 
have gone through two rather distinct 
phases. When it found itself unable to 
grapple with many of the problems of the 
day, it was derided as the ^ ^ dismal science ' ' 
by impatient reformers. More recently, 

55 



THE ECONOMIC UTILIZATION OF HISTOEY 

since it has begun to interest itself more in 
practical questions, it seems to be enjoying 
a popularity, especially in the United 
States, wMcb is not without its dangers. 
It attracts large classes in our universities ; 
it is being studied in our theological 
schools and by our churches ; large sums of 
money are being spent by our governments 
in the interest of economic investigations. 
The economist must be on his guard 
against allowing this present popularity 
to encourage dilettantism. Our age is 
growing more and more critical. The busi- 
ness world is applying rigorous tests to 
ascertain results. The educational world 
is studying methods of efficiency. The 
economist is liable to go through another 
period of discredit, unless he realizes that 
he must apply to his study the patience, the 
exactitude, the devotion to truth by which 
the great conquests of natural science have 
been obtained. He needs all of these quali- 
ties in a larger degree even than the stu- 
dent of nature, because of the long period 
through which his observations have to 
extend, and the great complexity of the 
phenomena with which he is dealing. But 
if he can apply these qualities in the reali- 
se 



EXPEEIMENTATION IN THE UNITED STATES 

zation that the world of economic change is 
his laboratory, and that it is his task to 
interpret its lessons, he will have his 
reward, in helping to solve the great 
human problems which have vexed man- 
kind since the dawn of history. 



57 



CHAPTER IV 

The Pathology of Pbogeess 

The world of nature, if left to itself, is 
generally in'a state of more or less perfect 
equilibrium. Those plants and those ani- 
mals survive which are best adapted to 
their environment; the others perish. 
Each species has its enemies which prevent 
any one of them from monopolizing the 
earth and which, in turn, are held in check 
by their own enemies. As soon as civilized 
man steps upon the stage, however, this 
harmony of nature is disturbed, and the 
intruder may be positively destructive of 
those forms of life which are not able to 
adapt themselves to him or to minister 
directly to his wants. A good illustration 
of this is given by Theodore Roosevelt, in 
his Hunting Trips of a Ranchman, with 
regard to the buffalo. 

The most striking characteristics of the buf- 
falo [he says], and those which had been found 
most useful in maintaining the species until the 
white man entered upon the scene, were its 
phenomenal gregariousness, .... its massive 
bulk, and unwieldy strength Its tough- 

58 



THE PATHOLOGY OF PEOGRESS 

ness and hardy endurance fitted it to contend 
with purely natural forces : to resist cold and the 
winter blasts, or the heat of a thirsty summer, 
to wander away to new pastures when the feed 
on the old was exhausted, to plunge over broken 
ground, and to plough its way through snow 

drifts or quagmires 

But the introduction of the horse, and shortly 
afterwards the incoming of white hunters carry- 
ing long-range rifles, changed all this. The buf- 
faloes ' gregarious habits simply rendered them 
certain to be seen, .... their speed was not 
such as to enable them to flee from a horseman ; 
and their size and strength merely made them 
too clumsy either to escape from or to contend 
with their foes.^ 

This is the first effect of civilized man, 
but not the last. The book in question was 
written over a quarter of a century ago, 
when the buffalo seemed to be on the point 
of extermination. Fortunately, as man 
becomes more enlightened, he begins to 
realize that, in his struggle for the suprem- 
acy over nature, he may carry the contest 
too far for his own good. We now find that, 
somewhat tardily, civilized man is trying 
to save from extinction the few scattered 
specimens of the bison that have survived, 
and even by skillful crossing to endow 

1 Theodore Eoosevelt : Hunting Trips of a Eanehman, 
1885, pp. 244-245. 

59 



THE ECONOMIC UTILIZATION OF HISTOEY 

domestic cattle with some of those good 
qualities of their wild cousins which have 
enabled them to cope successfully with the 
climate of the plains through so many gen- 
erations. Thus the stage of domestication 
follows the hunting stage of civilization, 
and the crude and wasteful processes of 
natural selection are replaced by those of 
artificial selection. 

Like Orlando in the Forest of Arden, 
civilized man begins the struggle for exist- 
ence with a drawn sword and a threat. 

He dies that touches any of this fruit 
Till I and my affairs are answered. 

In time experience teaches him, in the 
the words of the Banished Duke, that 

Your gentleness shall force 
More than your force move us to gentleness.^ 

The course of man's dealings with 
nature is paralleled in his dealings with his 
fellow men. Almost every new invention, 
almost every new process, creates a power 
which is susceptible of abuse, or leads to 
changes in conditions which may be injuri- 
ous to certain classes or certain interests. 

2 As You Like It, Act II, Scene 7. 



THE PATHOLOGY OF PEOGEESS 

The pioneers of industry have much in 
common with the pioneers of the frontier. 
Even those improvements which seem altor 
gether good may bring in some incidental 
evil, which, while not by any means 
counterbalancing the good, yet makes itself 
felt as something to be removed. A good 
example of this is seen in the homespun 
industry of some of the Scotch isles. The 
island of Harris has long been famous for 
the quality of its tweeds. The climate is, 
however, very wet, and the sheep have been 
so subject to disease that it has been the 
custom to rub them with tar and grease to 
protect them from the cold. More recently 
an improved breed of sheep has been intro- 
duced, which is able to resist the climate, 
but it is now found that the grease which 
protected the sheep also improved the 
quality of the wool, so that the newer 
fabrics are not as good as the old ones.^ 
This is a common experience, not only in 
the history of inventions, but in the his- 
tory of man's efforts to introduce higher 
forms of economic life and a higher kind of 
civilization. 

3 United States Consular Eeports, November, 1909, p. 
223. 

61 



THE ECONOMIC UTILIZATION OF HISTOEY 

The most important step upwards from 
savagery is to substitute the law of con- 
tract for the law of conquest. But as soon 
as violence is put down, there is danger 
that the physical strength and the courage 
which were essential to existence in the 
ruder age will be lost or impaired. New 
dangers are also possible. If the law 
decrees that wealth shall be distributed, 
not as the result of brute force, but through 
free bargaining among producers, there is 
a possibility that the advantage will go, not 
to the man who produces the most, but to 
the man who is most unscrupulous in driv- 
ing a hard bargain. It then becomes neces- 
sary to set up a new standard and to 
prohibit, not only positive fraud, but also 
all contracts which may be so unequal in 
their operation as to discourage industry 
and promote trickiness. Without violence, 
it is possible so to frame a labor contract, 
that the worker shall become virtually the 
bondsman of the employer. Thus slavery 
and peonage have to be prohibited as con- 
trary to public policy. But abolish slavery, 
and you abolish, with the right of exploita- 
tion, the obligation of the master to care 
for the worker in sickness and in old 

63 



THE PATHOLOGY OF PBOGEESS 

age. Docility and trustfulness, which may 
have been useful characteristics of the 
slave, are converted in the free man into 
that disregard of the future which we call 
improvidence, and the superannuated or 
sick worker, who has made no savings and 
has no family to care for him, constitutes 
a new problem. Relieve the sick and the 
aged by means of private charity or public 
relief, and you run the risk of developing 
the institutional pauper and the tramp, 
those sorry by-products of civilization, who 
will not support themselves, but whom 
charity will not suffer to starve, and who 
may not be put to forced labor without a 
violation of the constitutional prohibition 
of involuntary servitude. 

These evils, which are observed so 
frequently in connection with efforts to 
improve social institutions, lead different 
minds to quite opposite conclusions. Some, 
exaggerating the incidental evils of pro- 
gress, decry all efforts at betterment, and 
long for the good old times when there 
were no reformers. Others, realizing 
strongly the evils which grow up without 
regulation, think that reform has not been 
carried far enough and advocate some 

63 



THE ECONOMIC UTILIZATION OF HISTOEY 

extreme remedy such as socialism. In 
view of the difficulties which seem to attend 
both action and inaction, we naturally ask 
if there is no principle, based upon experi- 
ence, which will enable us so to steer the 
ship of state as to avoid both the Scylla 
of conservatism and the Charybdis of 
radicalism. 

In seeking such a principle, the first 
thing to realize is that we are living in a 
highly dynamic period of the world's his- 
tory. We are so accustomed to change, 
that we sometimes do not realize all that 
it means, or the great contrast which exists 
between the rate of change of the present 
day and any rate which has existed in any 
previous period of the known history of 
the world. These changes are seen, not 
only in the endless improvements in 
mechanical processes with which the great 
inventions of the eighteenth and nineteenth 
centuries have made us familiar. More 
recently this spirit of progress has taken 
hold of what throughout history has been 
the most conservative of callings, and agri- 
culture is now stimulated and vitalized by 
the application of science. New types of 
plants and animals are introduced in order 

64 



THE PATHOLOGY OF PEOGEESS 

to meet peculiar conditions; new methods 
of farming are devised by which dry lands, 
which have hitherto been considered infer- 
tile, are impressed into the service of an 
increasing population. The really signifi- 
cant thing with regard to these and other 
improvements is not that they are numer- 
ous and far-reaching, but that they are 
being deliberately planned. They are no 
longer the happy inspiration of the casual 
man of genius, they are often the outcome 
of a course of study deliberately under- 
taken with a definite end in view. Such 
establishments as the Carnegie Institution 
of Washington and the Sage Foundation, 
the agricultural experiment stations of the 
several States, and many departments of 
our universities and schools of agriculture, 
are not only pushing forward our knowl- 
edge of nature and her processes, but deter- 
mining in advance the lines on which 
progress shall be made. 

An interesting illustration of the ten- 
dency to anticipate discoveries is seen in 
the recent history of polar exploration. 
For centuries the difficulties of reaching 
the North Pole seemed almost insurmount- 
able. One expedition after another had 

65 



THE ECONOMIC UTILIZATION OF HISTOEY 

been undertaken only to add a new chapter 
to the history of failures. When, during 
the summer of 1909, it was announced that 
two explorers had independently succeeded 
in accomplishing this feat, it was also dis- 
closed that each had contracted in advance 
with certain newspapers for the exclusive 
right to publish an account of the dis- 
covery, which, at the time of making the 
contract, was still problematical. Two 
things are significant in this episode: the 
first is the eagerness with which discovery 
is pursued ; the second, the readiness to use 
a still unmade discovery as the basis of a 
property right. And if, as has since been 
proved, one of these expeditions was partly 
fictitious, this only makes the illustration 
more striking, as showing the impalpable 
foundation upon which a property right 
may be built up. When the art of aerial 
navigation was still in its infancy, an insur- 
ance company advertised itself as pre- 
pared to underwrite aerial risks. Every 
one of the fifty or sixty thousand patents 
applied for in our country in a single year 
represents a desire on the part of someone 
to effect a change in methods of production 
and to use it as the basis of some property 

66 



THE PATHOLOGY OF PEOGEESS 

right. It also represents the possibility of 
some dislocation of our industrial system, 
or some new menace to certain interests. 



67 



CHAPTEE V 
Economic Peogeess and Laboe Legislation 

Professor J. B. Clark, in his sugges- 
tive study of Economic Theory as Ap- 
plied to Modern Problems, enumerates 
^ve elements as characteristic of a 
dynamic society: (1) An increase in 
population. (2) An increase in capital. 
(3) Changes in the methods of produc- 
tion. (4) Changes in the methods of 
organization. (5) Changes in consumers' 
wants.^ 

Each of these five features of economic 
progress involves some new problems 
affecting labor. Many of these, fortu- 
nately, solve themselves; many others do 
not, and the experience of a century has 
proved that in, at least, many cases some 
form of legislation is necessary in order to 
prevent the incidental evils of progress 
from being perpetuated and aggravated. 
Let us take them up seriatim. 

1 John Bates Clark : Essentials of Economic Theory, 
1907, pp. 203-206. 



PEOGEESS AND LABOE LEGISLATION 

1. The increase in population often 
involves a crowding in industrial centers 
with an increase in disease, which must be 
dealt with by tenement-house laws and 
sanitary measures. The increase of popu- 
lation combined with modern methods of 
transportation leads to the amazing migra- 
tion of modern times, which, in turn, 
creates new difficulties. To prevent the 
spread of contagious diseases, to prevent 
the abuse of the newcomers, some restric- 
tions have to be placed by law, not to stop, 
but to control, this flood of immigration. 

2. An increase in capital tends to make 
large aggregations of wealth, which by 
their very size weaken the personal ele- 
ment involved in the relation of employer 
and employed. The simple, almost patri- 
archal, expression ^^ master and servant," 
which served as the rubric of the law on 
these subjects in the time of Blackstone 
and, indeed, was not superseded in Eng- 
land as a legal term until 1875, is no longer 
applicable to modern industry, nor are old 
methods of bargaining satisfactory. New 
machinery must be devised to facilitate 
collective bargaining and to mitigate the 
effects of collective disagreement. 

69 



THE ECONOMIC UTILIZATION OF HISTOEY 

3. Changes in the methods of produc- 
tion, involving, as they do, more powerful 
and more complicated machines, bring 
many evils. In the early days of the fac- 
tory system, the displacement of skilled 
labor by unskilled was the most obvious 
injury felt by the workers. At the present 
time we are more concerned, because better 
acquainted, with the remoter and indirect 
effects of the age of machinery. We see new 
causes of accident, new kinds of industrial 
diseases, combined with a greater difficulty 
of securing the individual worker against 
the effects of accident and disease. Long 
experience has shown that these particular 
difficulties do not correct themselves, and 
one of the greatest problems in labor leg- 
islation at the present time is, on the one 
hand, to diminish accidents and disease, 
and on the other, to provide some form of 
compensation or some form of insurance 
for those who are their victims. Still 
more important, if possible, is the effect 
of machinery upon the children and 
therefore upon the workers of the future, 
and this, being comparatively remote and 
not realized for one or two generations, is 
the most difficult problem for the individ- 

70 



PEOGEESS AND LABOE LEGISLATION 

ual to solve. Government intervention 
seems the only agency sufficiently power- 
ful and sufficiently general to save a coun- 
try from the deterioration of its human 
capital. 

4. Changes in organization tend on the 
whole to give a new advantage to capital. 
It is now possible for a single company 
or combination of companies to be spread 
out over many states or many continents. 
This, while it makes for efficiency, also 
creates a power which may be abused and 
results in a demand for laws putting upon 
capital new responsibilities in the inter- 
ests of its employees. It, above all, points 
to the necessity of interstate and interna- 
tional labor legislation. With the aid of the 
International Association for Labor Leg- 
islation, a number of international treaties 
of great importance have been made, one 
of the more recent of which is a treaty 
between France and Great Britain, giving 
the workers of those countries reciprocal 
advantages in obtaining compensation for 
accidents. 

5. Changes in consumers' wants create 
an artificial instability of business, which 
shows itself in alternating periods of 

71 



THE ECONOMIC UTILIZATION OF HISTOEY 

activity and stagnation. The one tends 
to produce overexertion, the other, unem- 
ployment, and each demands legislation. 

It will be noticed that in each of these 
five cases the main purpose of the legisla- 
tion in question is to prevent some injury 
to the human beings for whose sake eco- 
nomic progress exists, and on whose effi- 
ciency its continuance depends. We should, 
therefore, add to the ^ve elements of a 
dynamic society which have been enumer- 
ated, a sixth, which has been comparatively 
neglected in the past, but which may prove 
in the future to be the most important of 
all. I refer to an improvement in the qual- 
ity of the population itself. This is not 
altogether a dream. The average duration 
of the human life has within a century been 
decidedly lengthened in many of the lead- 
ing countries of the world. In England 
and Wales, e.g., the average duration of 
life among males in the period 1838 to 
1854 was 39 %o years, in 1891 to 1900, 
44 Ho. In Sweden the average duration 
has increased from 39 %o in 1816 to 1840, 
to 50 %o in 1891 to 1900. Our statistics do 
not enable us to make general statements 
for the United States as a whole, but in 

72 ■ 



PEOGEESS AND LABOE LEGISLATION 

several of the States the same tendency 
shows itself.^ 

Many diseases and many accidents are 
now recognized as clearly preventable. 
There is every reason to believe that by 
proper care human life can be lengthened, 
disease and accidents diminished, and the 
physical strength of the population im- 
proved; but, in order to bring about this 
most important element of progress, the 
state itself, which alone has an interest 
extending beyond that of the individual 
lifetime, must intervene, in order to pre- 
vent well-recognized causes of retrogres- 
sion and also to promote those elements 
which make for improvement. 

In this process, mistakes are pretty sure 
to be made. Eugenics has not yet reached 
the position of an exact science. All legis- 
lation that is passed with good intentions 
does not produce the desired results. The 
point to be emphasized is that economic 
progress in itself involves inevitably in 
each of its elements some form of labor 
legislation. As long as change continues, 
we must expect that labor legislation will 

2 Irving Fisher: Eeport on National Vitality, 1909, 
pp. 18, 19. 

73 



THE ECONOMIC UTILIZATION OF HISTOEY 

be necessary. If the laws of the Medes 
and Persians were immutable, it was be- 
cause their economic life was stagnant. 
We should not forget, however, that the 
oriental politicians who are responsible 
for introducing this tradition into litera- 
ture invoked the immutability of the law 
on behalf of a brand-new measure of their 
own devising, the purpose of which was to 
check reform by casting the reformer into a 
den of lions. For according to the prophet 
Daniel, ^'All the presidents of the king- 
dom, the governors, and the princes, the 
counsellors, and the captains, have con- 
sulted together to establish a royal statute, 
and to make a firm decree, that whosoever 
shall ask a petition of any God or man for 
thirty days, save of thee, king, he shall 
be cast into the den of lions. Now, king, 
establish the decree, and sign the writing, 
that it be not changed, according to the 
law of the Medes and Persians, which 
altereth not."^ At the present day, there 
are no more ardent advocates of the immu- 
tability of the law, none who more zeal- 
ously urge that things be left alone, than 
those the value of whose property rights 

8 Book of Daniel, vi. 7, 8. 
74 



PEOGEESS AND LABOE LEGISLATION 

rests upon some comparatively recent law, 
such as a liberal charter or a high import 
duty. 

This conception of labor legislation, if 
it could be generally entertained by our 
legislators and the public, would lead to 
certain important, practical results. 

1. Labor legislation would be less in 
quantity and better in quality. A measure 
adopted for what seems an emergency is 
almost always hastily drawn and soon 
requires amendment. As soon as it is rec- 
ognized that a certain type of legislation 
results from permanent conditions, more 
care will be bestowed upon it, and the 
changes will be fewer. 

2. Legislation would also on the whole 
be more prompt. Certain general effects 
of industrial progress are well known by 
the experience of other states. These are 
often not corrected until they have become 
so flagrant that they are taken up by phi- 
lanthropists or trades unions, and correc- 
tive measures are then passed under 
pressure without due study. Legislation is 
often so afraid of crossing its bridges 
before it comes to them, that it does not 
keep them in decent repair. 

75 



THE ECONOMIC UTILIZATION OF HISTOEY 

3. Laws would be more uniform, if 
labor legislation were recognized as result- 
ing from certain general economic condi- 
tions which are universal, or nearly so. 
More care would be taken to secure har- 
monious action between different countries 
and different States in the same federa- 
tion. 

4. Labor laws would be less frequently 
the expression of class feeling. Many bills 
which excite prejudice on this ground 
would be recognized as being really in the 
general interest. The courts, too, might 
perhaps find it easier to distinguish be- 
tween enactments which are really class 
legislation and as such condemned by con- 
stitutional principles, and those laws 
which, while applying to certain definite 
groups, are in reality passed for the 
benefit of all. 

5. The recognition of labor legislation 
as a permanent feature of our statutes 
would make it more consistent, because the 
very thought of adapting it to changes in 
economic conditions would force us to 
think more of those economic ideals which 
underlie subconsciously most social legisla- 

76 



PEOGEESS AND LABOE LEGISLATION 

tion, but are not always recognized or 
steadily followed. 

Each great period of the world's history 
has had some such economic ideal, which, 
whether or not formulated in words, has 
become a part of the mores of the time and 
country and has guided the law in its main 
features. Under the feudal system, soci- 
ety was divided into horizontal strata, 
based mainly on their relation to land, and 
involving specific duties as well as rights. 
The guild system dovetailed quite prop- 
erly with this system, although not 
strictly a part of it, since under it the 
mechanics of the cities were classified and 
their places definitely determined, the 
crafts themselves being more or less hered- 
itary. Whatever the merits or demerits 
of this system, it was one of order rather 
than one of freedom, one of conservatism 
rather than of progress. 

The economic ideal of the United States 
is very different from this. It may not be 
easy to define it in a few words, but its 
most concise expression is perhaps found 
in that part of the preamble of the Federal 
Constitution which states, after enumerat- 
ing certain political purposes, that its 

77 



THE ECONOMIC UTILIZATION OF HISTOEY 

object is ^^to promote the general welfare 
and secure the blessings of liberty to our- 
selves and our posterity.'^ Our ideal is 
clearly not a caste system, nor even a hier- 
archy of functions such as existed under 
the feudal system. It is a system of free- 
dom which implies equality of opportunity 
for all. This does not mean anarchy, for it 
is a liberty which brings blessings. It is 
not the paper liberty of a phrase. It is, 
moreover, a liberty of the race, not of the 
individual. All this implies, therefore, a 
liberty so regulated as to prevent one indi- 
vidual or one group from abusing their 
liberty to the harm of others. 

This policy, though unfortunately not 
always realized, is seen in many typical 
pieces of legislation, both Federal and 
State. The public land policy of the 
United States is based upon the idea of 
putting the land into the hands of small 
farmers, and therefore preventing its 
monopolization by a few. The homestead 
exemption laws of our States interfere 
with freedom of contract in the interest of 
the family. The Federal government intro- 
duced within the first few years of its 
existence a system of caring for seamen 

78 



PROGEESS AND LABOR LEGISLATION 

of the merchant marine in case of sickness 
by means of what would now be called 
compulsory sick insurance.* This remark- 
able piece of labor legislation, enacted in 
1798, anticipated by nearly ninety years 
the introduction of general compulsory 
sick insurance by Germany, showing that, 
even in those early days of weakness and 
decentralization, the United States was 
ready to practice social politics, when the 
practicability and the necessity of it were 
apparent. If a few years earlier Alex- 
ander Hamilton advocated a protective 
tariff, partly on the ground that it would 
introduce the factory system and thus 
secure the employment of children *^of a 
tender age,"^ this was not because of any 
desire to break down the health of the 
population, but simply because the evils 
of the factory system were not appreciated, 
as were the dangers of the sailor's life. 

We are fortunate in this country in hav- 
ing an ideal clearly expressed and pretty 

4 For a f uU history of the Marine Hospital Service the 
writer is indebted to a still unpublished monograph on 
the subject, written by Dr. A. M. Edwards for the 
Carnegie Institution of Washington. 

5 Report on Manufactures, 1791, p. 87 of reprint of 
1837. 

79 



THE ECONOMIC UTILIZATION OF HISTORY 

generally accepted, and it is this ideal 
which must give consistency to labor leg- 
islation. But it is a consistency of pur- 
pose, not of words, that we must aim at. 
A navigator might seem vacillating to a 
landlubber who observed that he sailed 
now on the port tack and now on the star- 
board tack and constantly changed his 
helm. But through all of the apparent 
changes he is working steadily against the 
wind toward his port. Labor legislation 
must likewise adapt itself to the particular 
exigencies of the times, maintaining always 
as its final purpose in the United States, 
*'to secure the blessings of liberty to our- 
selves and our posterity.'' Its very prohi- 
bitions are in the interest of a greater 
liberty, just as the traffic regulations of a 
great city put restrictions upon the indi- 
vidual driver for a time, in order to secure 
a freer circulation for the traffic as a 
whole. 

The movement for more intelligent labor 
legislation is but a part of the great move- 
ment for the conservation of our natural 
resources. But in the construction of the 
irrigation works which are already re- 
claiming so many square miles of territory 

80 



PROGEESS AND LABOR LEGISLATION 

and turning bad lands into fertile farms, 
the first step is the building of a dam. 
There are few persons now so short- 
sighted as to suppose that these dams are 
intended to prevent the water from reach- 
ing the arid plains. Every one knows per- 
fectly well that they are the very first 
condition of an adequate water supply. 
Likewise some restrictive legislation as 
applied to labol^ is often the condition of 
real economic freedom. It means that 
man is at last learning to apply to him- 
self those principles of domestication, 
preservation, and improvement which he 
applied to his live stock, when he emerged 
from the hunting stage of existence. 



81 



CHAPTER VI 

Fundamental Distinctions in Labor 
Legislation 

In the scholarly presidential address, 
which he delivered at the first annual meet- 
ing of the American Association for Labor 
Legislation, Professor Ely dealt with the 
relations of labor legislation to economic 
theory. He showed that most of the early 
economists were on principle opposed to 
legislation, which seemed to them to be a 
futile interference with economic laws, but 
that their successors gradually changed 
their views, until at the present day there 
are very few who would condemn labor 
legislation as such. If, however, we no 
longer hold that all labor legislation is un- 
scientific and futile, neither do we believe 
that all that goes under that title is scien- 
tific and effective. Still less do we believe 
that everything that is demanded in the 
name of labor is going to accomplish what 
is expected of it, even when we approve of 



DISTINCTIONS IN LABOR LEGISLATION 

its general aim. And while the doctrine 
of laissez faire no longer ranks as an 
infallible principle of statecraft, it may 
still serve the nsefnl purpose of the slave 
who stood behind the triumphant Eoman 
general to remind him that he was still a 
man. We, too, need occasionally to be 
reminded that, though legislation has 
accomplished much, it has also frequently 
failed ; that it is apt, even when successful, 
to produce unexpected results ; and that we 
cannot be too careful to study, with all of 
the statistical and administrative material 
at our disposal, the complex operation of 
past laws before advocating new ones. We 
prefer to let evils work their own cure, if 
they can, and we must always balance the 
^'ills we have'' against those '^we know not 
of." We have thus reached the point at 
which the emphasis should be laid, not on 
negation, nor on agitation, but rather on 
discrimination. 

The general term labor legislation em- 
braces at the present day a heterogeneous 
mass of enactments which impinge upon 
the individual in very different ways, and 
which really fall into three quite distinct 
classes, if we group them with reference 

83 



THE ECONOMIC UTILIZATION OF HISTOEY 

to their immediate bearing on economic 
processes. 

In the first class, which is also the oldest, 
we have what is commonly termed protec- 
tive labor legislation. Familiar types are 
laws limiting the age of employment of 
children, limiting the honrs of employment, 
prohibiting certain kinds of employment to 
women or children, requiring the use of 
safety appliances in connection with ma- 
chinery, limiting migration, etc. They 
determine the conditions under which labor 
must be performed, but do not directly 
aifect the terms of exchange. They oper- 
ate like dykes, which confine a river to a 
certain bed but do not change the flow or 
general course of the water. 

In the second class we have legislation 
which aims not so much at excluding cer- 
tain unfavorable conditions of labor as at 
the direct bestowal of pecuniary benefits. 
This legislation may not inappropriately 
be called distributive or positive legisla- 
tion. Compulsory insurance laws which 
require the employer or the state to con- 
tribute a part of the funds would come 
under this head, as well as employers' lia- 
bility laws, old age pension laws, laws pro- 

84 



DISTINCTIONS IN LABOE LEGISLATION 

viding for the fixing of wages by wage 
boards or compulsory arbitration, etc. 
These laws require certain positive contri- 
butions on the part of the public, the 
employer, or the wage receiver, or of sev- 
eral of them combined. They directly 
atfect the terms of exchange by supple- 
menting or modifying the wage contract. 

In the third class we have legislation 
which is designed to encourage or promote 
certain institutions, but which neither con- 
tains a prohibition nor an injunction, and 
may therefore be called permissive. Most 
of these laws in their application to labor 
involve the use of certain forms of self- 
help. In this group we should include, 
therefore, laws permitting and regulating 
labor organizations, benefit societies, co- 
operative associations, voluntary arbitra- 
tion boards, joint boards for collective 
bargaining, etc. 

The attitude of the law-giver towards 
the citizen in these three classes may be 
tersely expressed as follows: laws of the 
first class are mainly prohibitive and say 
^Hhou shalt not"; laws of the second class 
are mainly mandatory and say ^Hhou 

85 



THE ECONOMIC UTILIZATION OF HISTOEY 

shalf ; laws of the third class are mainly 
permissive and say ^ * thou mayest. ' ' 

It wonld carry ns too far to attempt any 
statistical study of the way in which the 
laws of these three classes have operated 
in practice, but their influence upon eco- 
nomic forces may be explained by an anal- 
ogy drawn from another and less debat- 
able department of economics. While on 
many topics economists are still at vari- 
ance, the experience of the world in dealing 
with money has been so long, and it has 
been the subject of such careful study, that, 
in spite of differences of opinion regarding 
certain points of monetary policy, there is 
a pretty general agreement regarding the 
laws of monetary circulation. One of the 
most important aims of all monetary legis- 
lation is to establish a definite standard of 
value. For centuries the world ^s stand- 
ards were steadily deteriorating. For 
many years after Sir Thomas Gresham had 
formulated his famous law, according to 
which bad money drives out good money, 
no means had been discovered of coun- 
teracting what seemed to be an inevitable 
law of monetary degeneracy. Just as soon 
as one metal depreciated in value, just as 

86 



DISTINCTIONS IN LABOR LEGISLATION 

soon as the government issued coins of 
light weight, or dishonest people sweated 
or clipped the coins, the inferior coins 
tended to remain in circulation, while the 
better ones were melted down or hoarded. 
The competition of those who had money 
to sell — that is, who wished to buy goods — 
took the form of offering the poorest 
money that the other party to the bargain 
could be induced to accept. Gresham's 
law was, however, not an inevitable law of 
nature. Like all economic laws it expressed 
a tendency; therefore, it expressed what 
will happen under conditions favorable 
to that tendency. It did not say that 
the tendency could not be neutralized by 
changing the conditions. And as soon as 
the government decreed that coins below 
a certain weight and fineness should not 
be received as legal tender, and provided 
for the retirement of light coins, the profit 
on using cheap money disappeared. The 
question was no longer, How bad a coin 
can be palmed off for a certain kind of mer- 
chandise? but. How much merchandise 
shall be given for a standard coin! 

Now there is a close analogy between 
the condition of things in the world of 

87 



THE ECONOMIC UTILIZATION OF HISTORY 

money down to the end of the eighteenth 
century, and in the world of labor during 
a good part of the nineteenth. In the 
wholesale and impersonal demand for 
labor which grew up with the factory 
system there was a natural tendency to 
employ those who would work for the 
longest hours and at the lowest wages. 
The result of employing this cheap labor 
was in the end to also make labor less 
efficient, and therefore worth less to the 
employer. It was practically impossible 
for the individual to fight against this 
tendency. An employer who deliberately 
paid higher wages in the expectation of 
getting more efficient labor was in the posi- 
tion of a person who should endeavor to 
raise the standard of the coinage by always 
paying out the best instead of the poorest 
coins that passed through his hands. He 
would have his trouble for his pains, and 
others would reap the benefit of his liberal- 
ity. When laws were passed against child 
labor, limiting the hours of employment, 
limiting the age of employment, etc., and 
enforcing them by inspection, a new stand- 
ard was created. The buying and selling 
of labor did not cease. The demand and 

88 



DISTINCTIONS IN LABOE LEGISLATION 

supply acted as before. But the conditions 
under which they acted were changed. A 
child of ten years was no longer legal 
tender in the labor market. A day of 
thirteen hours was no longer a legal stand- 
ard of time wages. The government did 
for labor what it had done for money, by 
providing that certain kinds of service 
should be as illegal as were certain kinds 
of money. The intervention of the State 
established a standard, changed the condi- 
tions of competition, and made it impos- 
sible for the employer to employ labor 
below a certain grade. 

Labor laws of the second class, which I 
have designated as "distributive," also 
have their analogy in monetary legislation. 
Just as the monetary standard has some- 
times been changed in order to benefit a 
certain class, especially to bring about a 
redistribution of wealth between debtor 
and creditor, so most of these laws en- 
deavor to bring about a redistribution of 
wealth either between employer and em- 
ployed, or between present and future 
income. If the government, e.g., issues 
paper money which is worth only 90 per 
cent of its face value, the debtor gains a 



THE ECONOMIC UTILIZATION OF HISTOKY 

hundred dollars on every transaction of a 
thousand dollars. 

Just so a law providing for compulsory 
insurance at the expense of the employer 
virtually says: Whenever you owe $1 in 
wages you are obliged to pay not merely 
the $1 stipulated, but $1 plus a certain per- 
centage needed to pay for the cost of insur- 
ance. Now while changes in the value of 
money which are brought about by unfore- 
seen variations in the value of the metal 
may produce beneficial effects, history has 
taught us the danger of changes which are 
made deliberately with the intention of 
helping one class at the expense of another, 
and the history of labor legislation likewise 
shows that such a danger is inherent in all 
legislation of this kind. The danger is not 
great enough in all cases to condemn it. 
But there is always a risk of demoralizing 
the class supposed to be benefited in any 
law which produces a gratuitous distribu- 
tion of property, unless carefully guarded 
against abuse. This danger is seen in the 
inheritance of millions by an irresponsible 
heir, in the marrying of millions by a con- 
scienceless fortune hunter, in the subsidiz- 
ing of industry by a protective tariff, no 

90 



DISTINCTIONS IX LABOE LEGISLATION 

less than in lavish poor relief and in the 
transfer of wealth by law to the working 
middle class. All sneh laws are exposed to 
a danger not found in laws of the first 
class, which involve primarily a restriction 
rather than a privilege. 

Labor laws of the third class also find 
their analogy in monetary legislation. 
Laws providing for the chartering of banks 
are here the counterpart of laws providing 
for the organization of trade unions, 
co-operative societies, and voluntary arbi- 
tration boards. A national banking law 
does not necessarily create national banks. 
National banks exist only if there are 
enterprising capitalists who desire to 
organize themselves under the law. For 
the same reason a law permitting the exist- 
ence of trade unions does not necessarily 
lead to their formation. Xo unions will be 
formed, unless there are people who can 
command the intelligent leadership and 
interest needed to organize them. The 
form, too, which they take will depend 
upon the national character, the economic 
and social habits, the prejudices, and even 
theories of those concerned. Hence we see 
that labor unions have taken one form in 

91 



THE ECONOMIC UTILIZATION OF HISTOEY 

England, but quite different forms in 
Germany, in France, and in the United 
States. 

In distinguishing these three types, I do 
not mean to assert that they are always 
kept perfectly distinct in practice. Labor 
legislation sometimes progresses in the 
accomplishment of a certain end from one 
type to the other. The small success 
of voluntary schemes for workingmen's 
insurance led the German government to 
introduce compulsory insurance, thus pass- 
ing from laws of the third type to those of 
the second. As regards savings, this 
matter is still regulated by laws of the 
third type in general, but some economists 
are now advocating compulsory saving as 
a kind of insurance against unemployment. 
Likewise the limited success of voluntary 
arbitration boards has led in Australasia 
to compulsory arbitration. In still other 
cases two methods may be combined in a 
single law. Thus in the Ghent system of 
insurance against unemployment, there is 
a coercive or distributive feature in that 
the town pays out of the proceeds of taxa- 
tion a certain sum towards the allowance 
of those who are out of work, but it pays 



DISTINCTIONS IN LABOE LEGISLATION 

this in most cases as a bonus, added to the 
allowance made by labor organizations. 
It thns makes use of the methods of the 
second class to encourage institutions of 
the third. 



CHAPTER VII 

PUEPOSES OF LaBOK LEGISLATION 

We have thus far distinguished between 
different types of legislation with refer- 
ence to the way in which it operates upon 
the economic processes. If we now look at 
the general purpose and trend of such 
legislation, we shall see that there are two 
main purposes which are not necessarily 
antagonistic, but which are yet distinct. 

The first purpose, which applies to all of 
the so-called labor protective laws and 
many of those which fall in the other two 
classes, is the preservation of the race and 
maintenance of its quality. The principal 
argument for protecting children and 
women against excessive or unhealthy 
work is that the next generation is threat- 
ened. The first child labor laws of Prussia 
were inspired by General von Horn, who, in 
1828, called the king's attention to the diffi- 
culty of getting able-bodied recruits from 
the manufacturing districts of the Ehine 
province. This same purpose applies to 
many other types of legislation. One of 
the strongest arguments for workingmen's 

94 



PUEPOSES OF LABOE LEGISLATION 

insurance is that the burden which falls 
upon women and children in the case of 
industrial accidents or disease is lightened, 
and that thus the succeeding generation is 
brought up under more wholesome condi- 
tions. 

Quite a different purpose appears 
when legislation aims to influence the 
distribution of wealth between different 
classes, when it consciously tries to raise 
the level of the wage-receiving class at the 
expense of the employers or of the com- 
munity at large. These two tendencies, 
which are really quite distinct, are often 
confused. Many people, especially those 
of the individualistic school, are apt to 
group all labor legislation together as 
socialistic; and in many cases the very 
epithet, in the mind of those who use it, is 
enough to condemn the movement. This, 
however, is a superficial view. Socialism 
is not the only antithesis to individualism. 
If the extreme individualist is one who 
believes in the greatest liberty of the indi- 
vidual, he may be restrained either in the 
interest of his contemporaries or in the 
interest of his successors. The motto of 
the individualist who disregards the inter- 

95 



THE ECONOMIC UTILIZATION OF HISTOEY 

ests of Ms contemporaries is, '^The public 
be damned'' ; the motto of the individualist 
who disregards the interests of his suc- 
cessors is, ^^ After us the deluge.'' Thus 
there are two policies opposed to indi- 
vidualism, one of which takes into account 
contemporary relations, the other of which 
considers the element of time. Our social 
world, like our physical, is a world of three 
dimensions, not of two. From one point 
of view individualism is justly contrasted 
with collectivism or socialism. From the 
other it is contrasted with a movement 
which is in reality not new, but which is as 
yet so little conscious of itself that nobody 
has apparently thought of giving it a 
name. If we may be permitted to borrow 
a word which was, I believe, first coined by 
Mr. Louis R. Ehrich, we may call it ^^pos- 
teritism. ' ' This movement is so important 
for the welfare and the permanent strength 
of any society, and it is capable of so many 
applications, that it almost implies a revo- 
lution in our social ideals. The general 
care for the life, intelligence, and morals 
of the next generation, as shown in labor 
laws, in the steps taken for the preserva- 
tion of the national health, in the fight 

96 



PUEPOSES OF LABOE LEGISLATION 

against tuberculosis, and in the creation of 
playgrounds for children, is but part of a 
greater movement which also includes 
measures for preserving our forests and 
our mineral resources, for draining our 
swamps, and for irrigating our deserts. 
Still another phase of it is seen in the study 
of eugenics by our sociologists. It is not 
difficult to interest people in the preserva- 
tion of our natural resources, but those 
who are far-seeing recognize that the peo- 
ple who inhabit a country are as much an 
asset as is its material wealth. Indeed, one 
without the other would be of little use. 
Protective labor legislation forms, there- 
fore, a part, but a very important part, of 
the general movement for posteritism. 

Much of this is not new. England, the 
states of continental Europe, and many of 
our own States furnish us with an abun- 
dant experience on which to base future 
action. And yet the matter is attended, in 
the United States, with peculiar difficulties 
which are partly legal and institutional, 
partly economic. 

The legal difficulties arise from the very 
framework of our government. We have 
within the limits of the United States, 

97 



THE ECONOMIC UTILIZATION OF HISTOEY 

excluding Alaska and onr distant depen- 
dencies, no less than fifty-one different 
legislative bodies which have the power to 
pass laws for a larger or smaller territory. 
Our country presents a more complex 
legislative problem than all the states of 
Europe taken together. There is, it is 
true, no lack of labor legislation in the 
United States. During the year 1907 alone, 
no less than 405 measures regarding labor 
were passed, and not all of the legislatures 
were working that year.^ But though 
many of our commonwealths are far ad- 
vanced and stand on a par with the best 
states of Europe with regard to certain 
matters, we find that even adequate laws 
for the protection of the labor of children 
are still lacking in many of the States, laws 
for the protection of the labor of women 
are often subject to attack and nullification 
on constitutional grounds. When we look 
at the administration of these laws, we are 
obliged to confess that very frequently 
they are not executed by experts, but that 
the poison of the spoils system still neutral- 
izes, in far too many cases, the good that 
laws might otherwise accomplish. 

1 Mass. Labor Bull., March-April, 1908, p. 69. 



PUEPOSES OF LABOR LEGISLATION 

While in the world at large labor legis- 
lation has already passed beyond the 
national stage and has now become the 
subject of international treaties, we are 
still struggling with a lack of uniformity 
both in lawgiving and in law-enforcing 
within the limits of a single country. We 
are not even able to command satisfactory 
information with regard to industrial acci- 
dents or industrial diseases in order to 
guide future legislation. So simple a 
matter as the registration of vital statistics 
is still in such a state of chaos that Con- 
gress has been obliged to request the 
States to introduce registers and has 
ordered a model law drawn up for their 
guidance. If we look at the matter in all 
frankness we must acknowledge that, while 
our industries are noted throughout the 
world for the inventiveness, the mechanical 
skill, the business talent which they com- 
mand, and while we have every reason to 
be proud of our educational system and of 
our standing in international relations, 
we have apparently overlooked the art of 
legislation. The great mass of our State 
legislators have had no previous training 
in the study of lawmaking and law-enforc- 



THE ECONOMIC UTILIZATION OF HISTOEY 

ing. We prevent them from becoming 
skilled and responsible lawmakers by rota- 
tion in office, by infrequent sessions, and 
by constitutional limitations. The instruc- 
tion which they receive from the lobby is 
often effective, but one-sided, since it is 
more apt to show them what is for their 
individual interest than what is for the 
interest of the public, present and future. 
There are, fortunately, signs of improve- 
ment. Expert commissions are being 
used more and more. The development of 
such institutions as the Legislative Eefer- 
ence Library in Wisconsin is doing much 
to educate our lawgivers. But the fact still 
remains that, of all the industries of the 
United States, lawmaking is perhaps the 
most backward. 

There are also economic conditions 
which have made it peculiarly difficult to 
secure intelligent action on this subject in 
our country. The exhibit of the Pittsburgh 
Survey^ may serve as an instructive object 

2 This exhibit was opened in 1908 to show graphically 
some of the results of the intensive study of the industries 
of Pittsburgh, which was undertaken by the Eussell Sage 
Foundation, and the details of which were later pub- 
lished in a series of volumes. 

100 



PCBP06ES OF la^:?. iz: Illation 

lesson. A visitor to that e. :iibit sees, as 
he enters the staircase hall c : am^e 

Institute, some beantifnl f : repre- 

senting the industries of ? :r^ri in 

theiT power and energy. A= i ^ - :. he 

sees another series of fre&c ant- 

ing the "ceaseless move :-: -.'--'.- 

pie," men, women, and o_ : v . :i 

to work or play. It is tr - e :^ 

informed, that these ^!gase& are not ideal- 
ized, hut it is also true that the artist has 
shown but one side of the medaL The 
assets are there, hut where are the HahUi- 
ties? Where is the depreciation aecoimt? 
If we pass into the room occupied by tiie 
Pittsbiir^ Survey, we see another frieze 
made np of small bladk figures, also pass- 
ing in an endless procession aronnd the 
room. Each one of these figures stands 
for Lr f :^^ 622 deaths from typhoid 
fr- : : —ithin a sin^ year. 

Z r -:i i_ _ :*--ents a loss of 

-c _ ^'^er t: ^-i- _:.i<?s and a 1^>?« 
to -- ;;l:--:-". ih --:: ;^ ^ :e^-.: , ^ : 
weaki-r:- :;: ~;:;-- -.:^--:':.^\ I" : :?-: 
to =e- -. \ ~ '- - :-- m:-^-:; ■: - . ': 
tL-.. "..^ ;_,-,:.-,:. ::: -;:- v:-.-.- 
placed up: I- :-e ~: . ::. after tiie 



THE ECONOMIC UTILIZATION OF HISTOEY 

introduction of a filtration plant in the 
water supply of Pittsburgh, the cases of 
typhoid fever were reduced by nearly 
three-fourths in the course of a year. 
Other figures show the deaths by accident, 
by tuberculosis, etc. Why is it that the 
community as a whole permitted this waste 
of human life to go on? It is not due to 
lack of engineering skill, for the highest 
ingenuity is displayed in the Pittsburgh 
mills. Nor is it due to lack of wealth, or 
business ability. It is mainly due to the 
fact that Pittsburgh, like the country as a 
whole, does not breed its own workers. A 
very large number of them are drawn from 
abroad. That supply keeps on coming in 
spite of typhoid fever and tuberculosis and 
the ten thousand annual deaths by accident 
on our railroads. A factory or a railroad 
must allow in its accounts for the deterio- 
ration of its machinery, or it will soon come 
to grief. But the United States is like a 
railroad company which can always obtain 
new locomotives by simply paying for the 
expense of running them. Such a company 
could well afford to disregard its scrap 
heap. But the human scrap heap is not so 
easily disposed of. The premature death 

103 



PURPOSES OF LABOR LEGISLATION 

of a worker means not simply the elimina- 
tion from the industrial world of another 
human machine; it often means a widow 
and children growing up in a state of 
poverty and want, it means a weak instead 
of a strong worker twenty years from 
now. Whatever the industrial structure of 
society may be at that time, whether capi- 
talistic or socialistic or communistic, that 
means an economic loss. The action taken 
by us of the present generation to prevent 
that loss depends upon whether our social 
consciousness is able to project itself so 
far into the future as to be influenced by 
considerations which will perhaps never 
affect us personally. Socialism has em- 
phasized the injustice of many of our social 
institutions. Posteritism points out our 
short-sightedness. If our motto is, *' After 
us the deluge, *' we shall certainly take no 
thought for the morrow. But that was not 
the point of view of the founders of the 
Republic. For they framed the Federal 
Constitution, not only to ^^ establish jus- 
tice," but also to *^ secure the blessings of 
liberty to ourselves and our posterity." 



103 



CHAPTER VIII 

Peactical Methods in Laboe Legislation 

Blackstone says that three things are 
requisite to government; wisdom, good- 
ness, and power, and of these three, he 
thinks that democracies are more likely to 
have goodness than either of the other 
qualities, while in aristocracies, more wis- 
dom is to be found. A cynic might prefer 
to express the same idea negatively, and 
to say that democracies have even less wis- 
dom than they have goodness, and aris- 
tocracies, even less goodness than wisdom. 
Blackstone certainly does not entertain a 
very high opinion of the British Parlia- 
ment of his day. ^^It is perfectly amaz- 
ing," he says, ^'that there should be no 
other state of life, no other occupation, 
art, or science, in which some method of 
instruction is not looked upon as requisite, 
except only the science of legislation, the 
noblest and most difficult of any." Black- 
stone wrote some 140 years ago, but can 
we truthfully say that we of the United 

104 



PEACTICAL METHODS IN LABOE LEGISLATION 

States have progressed far beyond the 
state of things then described by him? 
How many of our State or even national 
legislators have had any special training 
in the art of lawmaking? Even when they 
are lawyers by profession, they have, at 
best, been trained in what the law is, not 
in what it ought to be, and the science of 
legislation is still conspicuous by its 
absence from the curricula of our law 
schools. Nor do we give our legislators as 
a whole the benefit of such rude appren- 
ticeship as they may gain in our State 
Capitols. A large fraction of those who 
have had such experience are annually or 
biennially retired to private life in order 
to make room for others. This is true even 
in the state which is known as the ^^ state 
of steady habits.'' In the Assembly of 
1909, e.g., only 28 per cent of the members 
of both houses had had any previous legis- 
lative experience whatever. Nearly a 
third of them were farmers. Now farmers 
are as a rule estimable men, individually, 
but they do not often, in the State of Con- 
necticut, find enough leisure in the inter- 
vals of coaxing a scanty living from our 
stony soil to devote themselves profoundly 

105 



THE ECONOMIC UTILIZATION OF HISTOEY 

to the study of jurisprudence. The judi- 
ciary committee is, it is true, always com- 
posed of lawyers; but it is rather rare 
in other departments of lawmaking to 
find such impartial specialization as was 
applied a few years ago to the make-up of 
the Committee on Public Health, when two 
physicians were re-enforced as experts by 
two undertakers and a grocer ! 

Thus the legislation of our States, which 
is prodigious in its mass, amounting easily 
in a single year to 16,000 enactments, is 
mainly the product of unskilled labor. 
Hence, when it is submitted to the trained 
minds of our courts, it is not surprising 
that a great deal of it is condemned. The 
result is that, while our business men, 
our scientists, our professional men, our 
inventors, our philanthropists, are eagerly 
pressing forward to conquer new fields, a 
large part of the labor of our trained 
jurists seems to be employed in putting on 
the brakes. This remark must not be taken 
to imply any disrespect for the mechanical 
virtues of the brake. We need' it in all 
walks of life. We need it commercially 
and socially as well as mechanically. But 
if you apply the brakes to a part of the 

106 



PEACTICAL METHODS IN LABOE LEGISLATION 

train only, while the locomotive is under 
full steam, something is sure to be dis- 
located. 

This is precisely what happens, when 
new processes, new methods, new forms 
of organization are introduced into our 
economic life, and the legal machinery for 
handling them is blocked in its develop- 
ment by the tardiness or weakness or care- 
lessness of legislation. This is what hap- 
pens, when we try by all means to stimulate 
our industries, but fail properly to protect 
children and women from the effects of 
long hours, or, having passed a law, nullify 
it as contrary to the constitution. This is 
the case, when we increase the hazards of 
travel and of manufacture by increasing 
the speed, or of coal mining by working 
lower levels, and yet fail to require ade- 
quate safety appliances, or refuse to give 
to the individual who may be injured as 
the result of these processes, any indem- 
nity, unless he is able to prove, by an 
expensive lawsuit, not only that someone 
was to blame, but that that person was not 
a fellow servant of his, and that he himself 
was not guilty of contributory negligence. 
Yet the principle of averaging the property 

107 



THE ECONOMIC UTILIZATION OF HISTOEY 

losses of a dangerous occupation such as 
navigation is as old as the Lex Rhodia de 
jactu. If it is in the interest of commerce 
to apportion among the shippers the loss 
which arises when a part of the cargo is 
jettisoned to save the ship, is it not equally 
in the interest of society to distribute the 
loss when a human being is jettisoned in 
the dangerous processes of modern in- 
dustry? 

The wastefulness and inequity of our 
present system is at last coming to be 
recognized, and yet, as soon as we speak 
of substituting a better one, or introducing 
anything like compulsory insurance or 
workmen's compensation, we are at once 
met with the bugaboo of unconstitution- 
ality, and one of the first problems of the 
various commissions now studying this 
subject is to steer clear of this ever-present 
danger to legislation. This is not the place 
for a discussion of the principles of con- 
stitutional law. They have been from the 
beginning of our history the perennial 
subject of debate between political parties, 
and it is more than probable that even 
experts would not agree in their solution 
of all of the questions that may arise in 

108 



PEACTICAL METHODS IN LABOR LEGISLATION 

this connection. There are, however, a 
few general principles of interpretation 
that should be emphasized. One is that a 
power which Congress may exercise for the 
benefit of property, cannot consistently be 
denied to it, when it attempts to exercise 
it for the benefit of persons. Thus, if we 
ask Congress to impose a prohibitory tax 
on poisonous matches in order to protect 
the health of the workers, we cannot be 
charged with misusing the taxing power of 
the government, as long as Congress can 
impose customs duties, in order to benefit 
owners of mines and manufactories, and 
can tax State bank notes, in order to give a 
bank note monopoly to the national banks. 
We should also not forget that all of our 
constitutions, both Federal and State, 
make provisions for their own amendment, 
their framers thus recognizing that a 
change of circumstances might require a 
change in the powers and duties of govern- 
ment. We of the present generation are 
not honoring the founders, but rather dis- 
playing our own narrow-mindedness, if we 
refuse in the name of constitutionalism to 
make use of the power of amendment which 
they deliberately conferred upon us. Let 

109 



THE ECONOMIC UTILIZATION OF HISTOEY 

US not forget that the law is made for man 
and not man for the law. 

It is true that every law which affects 
economic and social conditions is like a 
piece of social surgery. It may cut deeply 
into the very arteries of industry; it may 
sever the nerves of trade and of enterprise. 
The recognition of this fact is often used 
as an argument in favor of laissez faire. 
Rather than run the risk of doing harm, it 
is better, we are told, not to do anything 
at all. This maxim is a wise one in a cer- 
tain stage of development. It was perhaps 
wise in surgery before the discovery of the 
circulation of the blood, and of anaesthetics. 
But increased knowledge has made surgery 
bold. It is bold because it is instructed. It 
is precisely because the modern surgeon 
not only realizes the delicacy of the human 
body, but also understands the working of 
its different parts, that he can perform 
with confidence operations which a few 
years ago would have resulted in the death 
of the patient. 

Legislation is just beginning to pass out 
of the primitive stage in which surgery 
found itself a century ago, and it is my 
present purpose to try to point out the 

110 



PEACTICAL METHODS IN LABOE LEGISLATION 

method by which its work may become 
more effective and less dangerous. While 
much that I say has a general bearing upon 
all legislation, I shall, of course, speak 
specifically of what seem to me some of 
the requisites of labor legislation. 

The first thing to emphasize is that every 
law should be preceded by a careful inves- 
tigation of the facts, economic, industrial, 
and medical. Put in this way, the state- 
ment may seem a truism, but it is a rule 
that is often disregarded. It is, moreover, 
a rule which it is not easy to carry out in 
our country. In certain lines our statistics 
are full and trustworthy, especially the 
general statistics of population, collected 
for the decennial census ; but our vital and 
accident statistics are very imperfect. It 
is clear that a legislature must work in the 
dark when providing against accidents and 
disease, unless it knows how prevalent they 
are. Hence the Association for Labor 
Legislation is working for the reporting 
of industrial diseases by physicians, and 
for fuller records of industrial accidents. 
It has also appointed a committee which is 
urging upon Congress the importance of 
a national investigation of industrial dis- 

111 



THE ECONOMIC UTILIZATION OF HISTORY 

eases. In this whole matter it is clear that 
we must work for co-operation between the 
sciences, especially between medicine and 
hygiene, on the one hand, and economics, 
sociology and statistics, on the other. 
Medical science has made marvellous pro- 
gress of late years in its own field, but it is 
only just beginning to realize the social 
side of its work. The development of a 
social service department in the Massa- 
chusetts General Hospital and the forma- 
tion of a society for the study of medical 
sociology in New York, are the encourag- 
ing beginnings of what we may hope will 
prove a beneficent and fruitful partnership 
between the sciences. In this field Italy 
has set us a splendid example by the foun- 
dation of the Hospital for Industrial Dis- 
eases in Milan. This institution contains 
not only the facilities for treating such 
diseases, but also laboratories in which 
they can be studied, and measures devised 
for preventing and curing them. 

Besides the vital and demographic facts 
already mentioned, we need also to know to 
what extent the purpose in view may 
already have been attained in whole or in 
part by existing agencies. We may 

113 



PEACTICAL METHODS IN LABOE LEGISLATION 

well profit by the example of Switzerland, 
which, before undertaldiig to introduce sick 
insurance, made an investigation of the 
work of the benefit societies. This careful 
statistical study showed that these societies 
had increased rapidly in the course of 23 
years. In 1880 they insured 7 per cent of 
the entire population, in 1903, 15 per cent.^ 
This is clearly a fact of the first impor- 
tance, and it has determined the entire plan 
of sick insurance in Switzerland, which, 
instead of creating new organs, has simply 
utilized those already existing. We are 
informed that in the United States some 
8,000,000 adult men and women are at the 
present day insured in fraternal orders in 
addition to 3,000,000 insured by other 
forms of benefit societies, such as railroad 
relief funds, trade unions, etc. If we 
assume with Dr. Brodsky,^ that each of 
these persons represents three others, we 
have 33,000,000 of inhabitants, or a third 

1 0. H. Jenny : The Problem of Sick and Accident 
Insurance in Switzerland, Yale Eeview, November, 1910, 
p. 241. 

2 E. J. Brodsky : Paper read at the National Fraternal 
Congress, National Fraternal Congress Bulletin, Novem- 
ber, 1910, p. 2. 

113 



THE ECONOMIC UTILIZATION OF HISTOEY 

of our entire population, benefited by these 
voluntary associations. 

Almost equally important is tbe study 
of pre-existing law, and above all of tbe 
legislative experience both of our own 
country and of others. Much unnecessary 
legislation is enacted annually for lack of 
this care. Professor Stimson quotes, as an 
extreme instance of it, the act passed by 
the Legislature of Massachusetts, some 
years ago, which virtually declared that the 
common law was the common law !^ 

It should be our purpose to enact no 
unnecessary law. But if we find that, after 
full consideration, there is an evil for 
which the existing laws do not supply a 
remedy, it is still important to find out 
what remedies have been applied by other 
countries, and what light is thrown by 
experience upon the operation of the pro- 
posed legislation. One cannot avoid the 
feeling that when the British Parliament 
passed the present old age pension act 
they did not take the trouble to study the 
German system of old age insurance, 
based upon the principle of contributions 

3F. J. stimson: Popular Law-Making, 1910, pp. 188 
and 357. 

114 



PEACTICAL METHODS IN LABOR LEGISLATION 

by the beneficiaries. It would also seem as 
if they had forgotten their own nnhappy 
experience with the lavish system of poor 
relief which was practiced only a century 
ago, and which proved to be not only costly 
to the taxpayer, but most demoralizing to 
those who were intended to be benefited by 
it. 

It would seem superfluous to mention the 
importance of careful drafting, were it not 
so often disregarded in practice. Any- 
body who expresses himself as opposed to 
stealing is liable in these days to be 
charged with lack of originality, and to be 
reminded that he is simply plagiarizing one 
of the Ten Commandments. Likewise a 
person who maintains that a law should 
state the intention of the legislator, and 
that it should be so clear that it not only 
can be understood, but that it cannot be 
misunderstood, is liable to be reminded 
that very much the same thing was said by 
Quintilian nearly two thousand years ago. 
But as long as people persist in violating 
these fundamental rules, not merely of law 
but of language, so long will it be neces- 
sary to lay stress upon them. Thus, not 
long ago in one of the New England States, 

115 



THE ECONOMIC UTILIZATION OF HISTOEY 

a legislator undertook to change the dates 
of the appointment to office of the members 
of a certain city commission. When the 
legislature had adjourned and the amend- 
ment was printed, it was discovered that, 
while the law distinctly stated that there 
should be three commissioners, the dates 
were so fixed that the law could not be 
complied with without the appointment of 
four. A western State, which has in gen- 
eral a well-deserved reputation for care in 
drafting, passed a tenement-house act 
some years ago, which the Supreme Court 
of the State declared impossible of execu- 
tion. The principal reason was that it was 
made so general as to require in country 
districts certain appliances which could be 
found only in cities. So flagrant are the 
violations of this fundamental rule of writ- 
ing that some public-spirited citizens have 
recently organized a society whose sole 
purpose is to attend to the careful drafting 
of laws. 

It goes without saying that the best law 
is futile without some provision for its 
execution. Labor laws are seldom self- 
executory. Factory acts involve more or 
less inspection of establishments which the 

116 



PEACTICAL METHODS IN LABOE LEGISLATION 

owners and managers do not always wel- 
come. The factory inspector mnst possess 
not only honesty bnt also technical knowl- 
edge, firmness, and tact. Yet it is notori- 
ous that in a large number, probably the 
majority, of our States, these important 
officers are appointed, not on account of 
their qualifications for the duties of their 
office, but because they have earned the 
gratitude of the appointing power by 
political services. Such men can hardly be 
expected to jeopardize their reappointment 
by an unpopular severity in the enforce- 
ment of the law. The Association for 
Labor Legislation has published a special 
study of the administration of labor laws 
from which it appears that only three of 
all our States require a civil service exami- 
nation for factory inspectors. A few 
require the appointment of **a suitable 
person" or *^a competent and practical 
mechanic." Most of them place no limita- 
tions whatever upon the appointment. The 
International Association for Labor Legis- 
lation is making a similar study of the 
administration of labor laws throughout 
the world, and a comparison of the best- 
administered state of Europe with our own 

117 



THE ECONOMIC UTILIZATION OF HISTORY 

is not flattering to our vanity. Prussia, 
e.g., goes so far as to require of its factory 
inspectors three years' technical study in 
such subjects as chemistry and mechanics 
and, in addition, one and one-half years' 
study of economics and public law. They 
must also pass two examinations in a Ger- 
man university. Such extreme require- 
ments would be plainly impossible in our 
country and perhaps undesirable, but they 
at least show how seriously the Prussian 
legislators take their labor laws. 

A final requirement, which I should like 
to emphasize, is seldom recognized, and 
yet it is, in my judgment, of great impor- 
tance. Every labor law should provide for 
a record of its own operations. No hospi- 
tal would be considered worthy of support, 
if it did not keep a careful record of cases, 
yet our legislators are willing to project 
into the economic life of society a great 
power, namely, the power of coercing indi- 
viduals, without even taking the trouble 
to find out how this power is operating. 

A few years ago one of our graduate 
students was working up a study of the 
factory laws of one of our States, and all 
of the printed statistics were in such an 

118 



PEACTICAL METHODS IN LABOR LEGISLATION 

unsatisfactory shape that he was actually 
obliged to organize a small statistical 
bureau in order to make the calculations 
needed for a comparison of the figures 
from year to year. 

I have intentionally omitted all refer- 
ence here to one topic which may seem to 
many the most important of all. I refer 
to the methods by which, when a bill is pre- 
pared, the favorable votes of the legisla- 
tors may be obtained. It is clear that laws 
which are stillborn are no laws at all, but 
the art of legislative midwifery is precisely 
that part of the art of legislation which has 
enjoyed a really professional development 
in our country. Legislators come and 
legislators go, but the lobby seems to be 
the one stable element in our legislative 
halls. The Association for Labor Legisla- 
tion does not expect, nor does it desire, to 
add to the world's knowledge of this sub- 
ject, though its members may need to be 
reminded, and reminded emphatically, that 
since this art has been developed in the 
service of private interests, those who aim 
at the public interest are under a peculiar 
obligation to study and apply its legitimate 
features. 

119 



THE ECONOMIC UTILIZATION OF HISTOEY 

The International Association for Labor 
Legislation exemplifies in its business 
methods the application of these practical 
principles. At the meeting held in 1910 in 
Lugano, the delegates divided themselves 
at once into five commissions. Each of 
these commissions had a certain set of 
topics to discuss. The work had been pre- 
pared beforehand. One of the important 
subjects was that of industrial poisons, 
such as lead, mercury, etc. The association 
had secured the preparation of an elabor- 
ate list of industrial poisons, together with 
statements regarding the symptoms pro- 
duced by them and the methods of treat- 
ment. This list, prepared by Professor 
Sommerfeld of Berlin, had been subjected 
to a careful revision by Dr. Fischer. Simi- 
lar studies had been made with regard to 
other topics, such as the hours of work in 
continuous industries, etc. A study of the 
enforcement of labor laws in the leading 
countries of the world has been begun and 
published in part. In order to secure a 
much-needed uniformity, one commission 
worked out a definition of the term eight- 
hour shift as applied to coal mining. The 
Bulletin issued periodically by the asso- 

130 



PEACTICAL METHODS IN LABOR LEGISLATION 

elation gives a survey of the labor legisla- 
tion of the world. 

It is by such careful preparation that 
the work of the International Association 
is made effective, and it is by the same kind 
of work that the American Association 
must justify its existence. In other words, 
we try to apply to legislation the same 
study of causes, of processes, and of effects, 
that lies at the basis of our modern science. 
We aim to utilize in our lawmaking the best 
results of the work done in medicine, 
hygiene, economics, sociology, and juris- 
prudence. We offer no single, simple 
remedy for our social ills. Social panaceas 
we put in the same class with the philoso- 
pher's stone and the dreams of the 
alchemist. Avoiding indifference on the one 
hand and sensationalism on the other, we 
aim to secure practical results by scientific 
methods. 



121 



CHAPTER IX 

ACATALLACTIC FaCTOES IN DlSTEIBUTION" 

The economist who received his notions 
of the science thirty or forty years ago 
through the medium of the standard text- 
books must look back with a certain regret 
upon a time when economic processes were 
so alluringly simple. There were three 
main factors in production, land, labor, and 
capital, with business direction as a possi- 
ble fourth. The landlord received rent, the 
laborer wages, the capitalist interest, and 
the manager profits. The product was con- 
ceived as being distributed among these 
four groups according to the harmonious 
action of self-interest, working through 
the processes of bargaining. Indeed, 
wages were often regarded as a simple 
quotient, obtained by dividing the wage 
fund by the working population, hence, like 
other quotients, it could be raised only by 
increasing the dividend or decreasing the 
divisor. 

The more intensive study of economic 
facts and economic history which has taken 
place in recent years has, however, shown 



ACATALLACTIC FACTOBS IN DISTEIBUTION 

US that things are not really as simple as 
they were assumed to be. The production 
and distribution of wealth are influenced 
by many forces which are not economic in 
the usual acceptance of the term. Econom- 
ics still lacks a suitable term to express 
collectively those processes which are not 
based upon free exchange, but inasmuch 
as the term catallactics has been applied 
by Whateley to the science of exchanges in 
the narrower sense of the word, the term 
acatallactic would naturally describe those 
economic processes in which exchange is 
lacking. 

Not only is there a great deal of distri- 
bution which takes place without reference 
to the law of supply and demand, but a 
careful study of economic life in different 
countries shows us that the three elements 
into which the national production is 
usually divided by economists have by no 
means a perfectly fixed connotation. Each 
of the terms, rent, wages, and interest, may 
mean different things, according to the 
form in which law or custom has cast them 
and according to the limitations under 
which they exist. Let us consider a few of 
the more important cases in which eco- 



THE ECONOMIC UTILIZATION OF HISTOEY 

nomic processes may be influenced or modi- 
fied by other, especially legal or institu- 
tional, factors. 

1. Much of the distribution of wealth 
does not take place under the operation of 
strictly economic forces at all, if we under- 
stand by them the free play of self-interest 
working through supply and demand. For 
example, the transfer of wealth from one 
generation to another is practically never 
made in this way. In rare cases it may 
happen that a person will buy a life 
annuity of an insurance company, in which 
case the transfer does take place through 
an exchange of rights. But generally it is 
gratuitous, determined by the will, some- 
times the whim, of a testator, sometimes 
by the dictum of law in the case of intes- 
tacy, and always under the regulation of 
law, which sets limitations on the whims of 
testators and either prevents certain dis- 
positions, such as entails, as a matter of 
public policy, or enforces certain others in 
the interest of heirs. Much wealth is also 
transferred by marriage, by gifts to chil- 
dren, relatives and others. All of these 
taken together are important causes of the 
unequal distribution of wealth which have 

124 



ACATALLAOTIC FACTOES IN DISTEIBUTION 

nothing to do with the play of economic 
forces as ordinarily understood. 

Even in business much goes by favor, 
sometimes degenerating into ^ ^ graft. '^ 
The line between the two is variable and 
depends upon shifting ethical and legal 
restrictions. The salaries paid to officers 
of large corporations, as disclosed in the 
insurance investigations of New York, are 
sometimes determined, not by supply and 
demand or the market price of their ser- 
vices, but by the willingness of persons 
controlling a corporation to vote them- 
selves large salaries. What a few years 
ago was considered a legitimate perquisite 
is now treated as illicit and condemned 
by public opinion. The ability which the 
managers of great enterprises have to 
show their friends special favors is another 
instance of the distribution of wealth by 
other than economic processes. A railroad 
president who should supply his friends 
with coal out of the coal pockets of his 
company would doubtless be subjected to 
criticism. Yet that same president will 
give a free pass, which means coal trans- 
formed by combustion into motion, with 
apparent unconsciousness that he is giving 

125 



THE ECONOMIC UTILIZATION OF HISTOEY 

away the stockholders' property. Manu- 
facturers who would scorn to ask the gov- 
ernment to give them presents from funds 
raised by taxation, will besiege Congress 
for tariff duties which allow them to tax 
their fellow citizens indirectly. More and 
more, however, either the law or public 
opinion is setting limits and raising the 
standard. 

2. Even where the law of supply and 
demand has sway, there are often limita- 
tions placed upon its unlimited action by 
ethical standards, or by law. Let us take 
a few random examples. 

a. The rate of interest in Wall Street 
is practically free in spite of usury laws, 
yet the exaction of a high rate of interest 
on the security of salaries is, as shown in 
the investigation by the Sage Foundation 
of the salary loan business, considered a 
shady occupation. 

b. In the determination of rent we find 
occasional instances, as seen in the estab- 
lishment of the City and Suburban Homes 
Company, where owners of property delib- 
erately restrict themselves to a certain 
income. There is, of course, a philan- 
thropic element here, but the point to be 

126 



ACATALLACTIC FACTOES IN DISTEIBUTION 

brought out is precisely that here philan- 
thropy does enter into business. 

c. The buying and selling of the pro- 
duct of the mind is always, and of neces- 
sity, dependent upon law. The property 
right in a book or an invention could not be 
enforced without a law determining the 
conditions. But many ideas, often most 
valuable ones, are handed down as a tradi- 
tion from one generation to another, and 
often the ingenious inventor of a machine 
or process voluntarily relinquishes the 
right which the law would allow him, as in 
the case of the Babcock tester. 

d. Profits are often limited by public 
opinion or law. This sometimes takes the 
indirect form of an increased capital 
expenditure. Let us suppose, e.g., that a 
certain enterprise yields a net income of 
$50,000 a year and that the investment of 
$1,000,000 is sufficient to do the business. 
In this case the dividend might be 5 per 
cent. It is possible, however, that the 
directors might vote to expend an addi- 
tional $250,000 for beauty or ornamenta- 
tion, in which case the stockholders could 
get but 4 per cent. The railroad companies 
are slowly recognizing a certain moral 

137 



THE ECONOMIC UTILIZATION OF HISTOEY 

obligation to build handsome railway sta- 
tions in order to satisfy the public. They 
probably do not increase the traffic, and 
at best aid the finances of the company 
indirectly by making hostile legislation less 
likely. As far as it goes, this expenditure 
represents, therefore, a deliberate restric- 
tion of profits in the interest of the public. 
The difference between the railroads here 
and in countries like Germany or Switzer- 
land, where they are under government 
control, illustrates this point. A great 
deal is spent in our country on luxuries, 
such as parlor cars, sleeping cars, etc., for 
which a direct charge can be made, but 
comparatively little on the convenience or 
beauty of railway stations, on which no 
direct toll can be levied. In Germany and 
Switzerland it is the other way. The trains 
are not, as a rule, as luxuriously equipped, 
but the railway stations are better planned 
and more ornamental. It is comparatively 
rare for a manufacturing concern in our 
country to regard the aesthetic element in 
constructing its buildings, but even here, 
where a factory is the dominating industry 
of a small town, money is sometimes spent 
on architecture or grounds, and to that 

138 



ACATALLACTIC FACTOES IN DISTEIBUTION 

extent it may be said that profits are 
deliberately relinquished in the interest of 
the general public. A corporation desiring 
new stock may in many States issue it at 
par to its stockholders, though the market 
price may be 150 or 200. In Massachusetts 
the law forces public service corporations 
to issue the stock at a price determined by 
a State commission. But occasionally in 
other States, corporations, when increas- 
ing their stock, offer it at a price above par 
without compulsion of law. These illus- 
trations show that, whether under pressure 
of law, or of public opinion, or from far- 
sightedness, public service corporations 
are feeling a certain obligation to restrict 
their profits, which doubtless means a tacit 
recognition that some of the income is due 
to the environment and should, therefore, 
be shared with the general public. 

e. In the determination of the price 
paid for services there is a great deal of 
confusion. Supply and demand hold sway, 
doubtless, with regard to the great mass of 
services which are paid for under the name 
of wages. Yet even here there is probably 
a practical minimum determined by cus- 
tom. Most people, e.g., would hesitate, 

129 



THE ECONOMIC UTILIZATION OF HISTOEY 

even in hard times, to offer to employ 
people at half the customary rate of wages, 
though it might be for the immediate bene- 
fit of the worker to take this low rate rather 
than earn nothing. With regard to the 
more skilled services of the professions 
there are often curious contrasts. Most 
physicians, e.g., have a fixed charge per 
visit, whether the patient be rich or poor. 
In the case of surgeons, however, it is very 
common to ^x the compensation by indi- 
vidual rather than by group bargaining, 
and literally to charge what the traffic will 
bear. The multimillionaire, simply by vir- 
tue of his wealth, will ask free transporta- 
tion and other favors from a railroad, but 
on the other hand, if his appendix is out of 
order, he will find that it costs much more 
to remove a multimillionaire appendix than 
an ordinary one. 

3. Quite apart from limitations created 
by law, or custom, or ethical standards, we 
are learning that the actual working of the 
machinery of production often depends 
upon the legal form which the contract 
takes. Let us consider — 

a. The forms of capital contract. The 
capital for large enterprises is generally 

130 



ACATALLACTIC FACTOES IN DISTEIBUTION 

obtained at the present time through some 
kind of a joint stock company. But here 
again we have a great variety in the con- 
ditions under which the capital is supplied. 
The stockholders are nominally the owners 
and, therefore, have the control of the 
property. And yet even among them there 
are differences between the common and 
preferred stock, both as regards income 
and control. The writer happened to get 
some of the preferred stock of a certain 
corporation a few years ago, the common 
stock of which was worth very little. It 
turned out, however, that under the charter 
the common stock was given the right to 
vote after a certain number of years. It 
thus became possible for some clever peo- 
ple to buy up the common stock for a mere 
song and, by means of the voting power, to 
virtually force the real owners of the com- 
pany to buy them out. This form of capi- 
tal contract is calculated to encourage 
trickery and discourage careful business 
management. An illustration of the oppo- 
site is furnished by the experience of two 
of the smaller commonwealths of Europe. 
The prosperity of the Island of Guernsey 
is attributed to a considerable extent to a 

131 



THE ECONOMIC UTILIZATION OF HISTOEY 

form of loan upon real property, known by 
the French term rented This is virtually 
a mortgage which cannot be foreclosed, as 
long as the borrower pays his interest, so 
that the interest becomes a fixed charge, 
and the profits all go to the worker. It is 
said that many people, starting without 
property, have through this form of loan 
become prosperous farmers. It is inter- 
esting to note that the new Swiss Civil 
Code, which has recently been adopted by 
the Swiss Confederation, provides for a 
form of loan on land known as the Gult. 
The institution is very similar to the rente 
of the Island of Guernsey, and it is said 
that it was introduced into the Civil 
Code of the Confederation, because it had 
worked so advantageously in some of the 
smaller cantons. 

b. When we come to the relations of 
labor to the employer, the variety is still 
greater. Even under slavery, which may 
be based upon contract as well as upon 
force, we have many modifications of, and 
many degrees in, unfreedom, such as serf- 
dom, peonage, the indenture system. Even 

1 H. Eider Haggard : Eural England, Vol. I, 1902, pp. 
79-83. 

132 



ACATALLACTIC FACTORS IN DISTRIBUTION 

when slavery, pure and simple, is the rule, 
there may be a limitation like the coarta- 
cion, which prevailed under the Spaniards 
in Cuba, and according to which a slave 
might, by paying a part of his own value to 
his master, legally limit his master's prop- 
erty right and make it more easy to secure 
freedom.^ 

The wage system itself permits of an 
indefinite number of variants. Some years 
ago David Schloss enumerated, without 
exhausting the subject, nine different kinds 
of wage contracts which were common in 
England. In certain occupations where 
gratuities are customary, the gratuities 
may themselves not only constitute the 
entire income of the employee, but be 
so large that he can afford to pay his 
employer for the privilege of working for 
him. This represents one extreme. A good 
historical example of the other extreme is 
the wage contract made between Laban 
and Jacob, when the latter agreed to work 
seven years for the former in order to get 
a wife, and then received an inferior arti- 
cle in payment, so that he had to work 

2 Hubert H. S. Aimes : Coartacion, Yale Beview, Feb- 
ruary, 1909, pp. 412-431. 

133 



THE ECONOMIC UTILIZATION OF HISTOEY 

seven years more to secure what he had 
contracted for in the beginning. Besides 
the indefinite number of possible wage con- 
tracts which lie between these extremes, 
we find that in many countries certain 
terms are read into the contract by law. 
This is especially the case in countries like 
Germany, which since 1884 has provided 
compulsory insurance for certain classes 
of workers. This idea has spread so far, 
that more than half of the population of 
continental Europe west of Eussia is now 
living under laws which provide more or 
less in the way of compulsory insurance. 
The older wage contract may be considered 
as in a broad sense an insurance contract, 
in so far as the wage receiver, by drawing 
a stipulated income, is insured against the 
chances of loss in the business as a whole, 
and this principle is confirmed by laws 
which, like labor lien laws, give the wage 
receiver a preferred claim upon the prop- 
erty of the employer. Compulsory insur- 
ance against accident, sickness, and inva- 
lidity goes a step further and insures the 
laborer against loss of his own working 
power. In still other cases the law may 
intervene, not simply to add compulsory 

134 



AGATALLACTIC FACTORS IN DISTRIBUTION 

stipulations to the simple contract, but to 
determine the terms of that contract, or 
the methods of making it, with a view 
either to securing what is supposed to be 
an equitable rate of compensation or to 
preventing disputes. The Wages Boards 
and Compulsory Arbitration systems of 
Australia and New Zealand are instances 
of this. Even a purely mechanical device 
like the taximeter may be the means of 
avoiding disputes and save the wear and 
tear of bargaining. Whether all or any of 
these devices are commendable or not, is 
not to be discussed here. They are men- 
tioned merely to show the great extent to 
which the complete freedom of contract is 
hedged about by law, for the purpose of 
preventing certain definite evils which 
have shown themselves in the modern 
industrial world. These laws do not abro- 
gate competition. Supply and demand are 
still active. Both parties are still striving 
to get as much as they can for what they 
give in return. But the laws do define the 
limits within which this competition is 
obliged to act. This function of law may 
be compared to the effect of the channel on 
the character of a river. One and the same 

135 



THE ECONOMIC UTILIZATION OF HISTOEY 

force impels Niagara and Meander. But 
whether this force of gravity produces a 
sluggish stream, foaming rapids, or a sheer 
waterfall, depends upon the bed through 
which the water moves. The legal forms of 
the wage contract are the bed on which 
supply and demand act, and whether eco- 
nomic processes shall be quiet or turbulent, 
productive or inefficient, depends in part 
upon the legal channel to which they are 
forced to confine themselves. 

The great variety in wage contracts 
already mentioned and the efforts which 
are made, not only by law but also by em- 
ployers on their own initiative, to improve 
the relations of capital and labor, show 
that the industrial world is feeling around 
for a method of diminishing the evils 
which have shown themselves in connection 
with the wonderful productive efficiency of 
the past century. Some of these efforts 
have proved abortive, as is seen so often in 
the history of productive co-operation and 
profit sharing. Others contain an element 
of paternalism, which often introduces new 
difficulties while removing some of the old 
ones. Among these various experiments 
there is one which is so remarkable, not 

136 



ACATALLACTIC FACTOES IN DISTEIBUTION 

only for the careful manner in which all of 
its provisions have been elaborated, but 
still more for the motive and theory which 
have inspired the inventor, that it deserves 
a brief description. This will be presented 
in the following chapter, not with the idea 
that a complete solution has been found 
here for the labor problem. Too short a 
time has elapsed since its introduction to 
warrant any final conclusion, favorable or 
unfavorable, regarding its merits, and the 
writer is of the opinion that many of its 
features would be impossible in other 
industries or under other circumstances. 
It is believed, however, that an explanation 
of its character cannot fail to be instructive 
to all who are seeking tentatively to im- 
prove conditions, and it is particularly 
valuable as an illustration of the ways in 
which the relations, both of labor and of 
capital, to an industrial organization may 
be modified for social purposes. 



137 



CHAPTER X 

A Socialized Business Enteepeise^ 

In the year 1846, a young mechanic 
named Carl Zeiss established a workshop 
for making scientific instruments in Jena. 
The founder of this simple business was 
born in 1816, in Weimar, and was the son 
of a toy merchant, who incidentally had 
been the instructor of the Grand Duke, 
Karl Friedrich, in the art of lathe turning. 
The son had studied in the gymnasium and 
had then learned mechanics in several 
workshops before he established himself 
in Jena. The business, although very 
small, was a success from the start. Sim- 

1 Acknowledgment for the facts stated in this article 
regarding the Zeiss establishment is hereby made to 
Professors Felix Auerbach and Julius Pierstorff and to 
Dr. Fr. Schomerus, who very courteously gave personal 
explanations to the writer in Jena; he is also indebted to 
the following works: Ernst Abbe: Gesammelte Abhand- 
lungen, dritter Band; Felix Auerbach: Das Zeiss-werk 
und die Carl-Zeiss-Stiftung in Jena; Fr. Sehomerus: Das 
Arbeitsverhaltniss bei der Firma Carl Zeiss, Jena, 3te 
Auflage, 1909; Siegfried Czapski: Erust Abbe als Arbeit- 
geber; A. Winkelmann: Ernst Abbe. 

138 



A SOCIALIZED BUSINESS ENTEEPEISE 

pie microscopes were the chief output, and 
some two hundred instruments of a rather 
primitive type were sold. From simple 
microscopes he proceeded to the manu- 
facture of compound instruments, always 
aiming at an improvement, but feeling the 
difficulty of obtaining better results by 
mere empiricism. It was fortunate that 
Zeiss was able to secure the services at this 
critical time of Ernst Abbe. Like his 
partner, he also was a native of the little 
Grand Duchy of Sachsen Weimar Eisen- 
ach. He was born in Eisenach in 1840. He 
was the son of a spinner, but had the 
advantage of a scientific education, studied 
in Jena and Gottingen, where he took his 
doctor 's degree, and finally settled in Jena 
in 1863 as Privat Dozent. He entered into 
partnership with Zeiss in 1866, was made 
extraordinary professor in 1870, but de- 
clined a full professorship in 1874 in order 
to devote his attention to the optical works. 
Abbe supplied the scientific mind which 
was needed to supplement the business 
talent of Zeiss. 

It was found, however, that one great 
difficulty in obtaining results lay in the 
imperfect and uncertain character of the 

139 



THE ECONOMIC UTILIZATION OF HISTOEY 

glass. There were practically at that time 
only two kinds of glass known, crown glass 
and flint glass, and it was difficult to get 
the glassmakers to experiment in the for- 
mation of other types. This important 
element was added by Dr. Otto Schott. 
Stimulated by an essay of Abbe, Schott 
began in 1881 extended experiments in 
new combinations and moved in 1882 to 
Jena, in order to prosecute these on a 
larger scale. The glassworks established 
there in 1884 were, and have continued to 
be, a distinct establishment under a sepa- 
rate name, i.e., Schott und Genossen, but 
Zeiss had an interest in the business. The 
first catalog was issued in 1886, and it 
contained such a large number of novelties 
that a new era in instrument building dates 
from that year. 

From this time on the optical works 
made rapid progress. One department 
after another was added, until the estab- 
lishment contained six different sections: 
(1) the microscopic; (2) the division for 
projection and microphotography ; (3) the 
photographic division; (4) the astronomi- 
cal division; (5) the terrestrial telescope 
division; (6) the division for mensuration. 

140 



A SOCIALIZED BUSINESS ENTEEPEISE 

An account of the various improvements 
and inventions which have originated in 
these works falls within the province of 
the physicist and need not detain the 
economist. The most popular, perhaps, is 
the trieder binocular, the principle of 
which was applied as early as the seven- 
ties by Abbe. Others are the relief binoc- 
ular telescope, of which the two arms are 
hinged, so that according to will one can 
either get an exaggerated stereoscopic 
effect, or, by placing the two arms together, 
look over a wall or around a corner; an 
instrument for measuring distances ; huge 
astronomical telescopes; and an epidia- 
scope, which will project upon a screen 
either lantern slides by transmitted light, 
or opaque pictures by reflected light. The 
works have steadily increased in size and 
the employees in numbers. Beginning with 
one assistant, Zeiss had gradually enlarged 
his force, until he had between three and 
four hundred in 1888. By 1900 the num- 
ber was over a thousand, and in the spring 
of 1908 it had touched two thousand, ex- 
clusive of some eight hundred employed 
in the glassworks. The simple buildings 
have grown into a great mass, filling a 

141 



THE ECONOMIC UTILIZATION OF HISTOEY 

large city square and spreading out beyond 
it. These few technical and mechanical 
facts are given in order that the reader 
may understand the kind of an establish- 
ment that we are dealing with. 

Carl Zeiss died in 1888, leaving his name 
to the works, and recognized as an impor- 
tant contributor to optical science by the 
University of Jena, which gave him an 
honorary doctor's degree in 1881. He left 
a son, who was for a short time only con- 
nected with the business. His withdrawal 
in 1889 left Abbe as the virtual head of the 
business, though supported ably by such 
men as Siegfried CzapsM, Max Fischer, 
and Eudolf Straubel. He retained this 
position, however, for only about three 
years, for in 1891 he founded the Zeiss- 
Stiftung. As already mentioned. Abbe was 
the son of a spinner. He had, therefore, 
experienced the hardships of long hours 
and small pay. He had now become the 
proprietor and manager of a large indus- 
trial establishment, but had not forgotten 
the surroundings of his youth and was able 
to realize the human side, as well as the 
financial and scientific sides, of great enter- 
prises. Though absorbed in his work, he 

143 



A SOCIALIZED BUSINESS ENTEEPEISE 

had found time to give a good deal of 
thought to public and social matters. His 
essays, which were published after his 
death, fill five good-sized volumes. Among 
these are observations on various subjects, 
political and social, and from these writ- 
ings we are able to learn something of the 
motives and reasons that guided him 
in creating the Zeiss-Stiftung, To ade- 
quately describe this foundation is, how- 
ever, not easy. Its statutes alone fill sixty- 
eight pages of the works of Abbe, and his 
commentary upon them fifty-eight more. 
It will, therefore, be seen that it is decid- 
edly complicated, much more so than the 
constitution of the United States. All of 
the details cannot be given, and only the 
leading features will be set forth. The 
provisions fall into two general groups, 
regulating (1) the ownership; (2) the 
relations with the employees. 

The conditions of ownership are so 
peculiar as to be almost unique. The 
foundation is neither a partnership nor a 
joint stock company, nor is it a charitable 
institution. It is a business corporation, 
owning and controlling the optical works, 
but it operates under the final control of 

143 



THE ECONOMIC UTILIZATION OF HISTOEY 

the state. This follows to a certain extent 
from the statement of the purposes, which 
are enumerated as follows : 

A. Appertaining to the works. 

1. The cultivation of the branches of instru- 
ment making which are established in Jena. 

2. The permanent provision for the economic 
security of these enterprises and for the mainte- 
nance of the labor organization which is con- 
nected with them. 

3. The accomplishment of greater social duties 
than a personal owner could permanently guar- 
antee for the purpose of bettering the personal 
and economic position of all of those who co-oper- 
ate in the works. 

B. Outside of the works. 

1. The promotion of the general interests of 
the mechanical arts involved. 

2. Participation in institutions and measures 
which are in the general interest of the laboring 
population of Jena and the neighborhood. 

3. The promotion of scientific and mechanical 
studies. 

It is clear that these purposes might be 
carried out by an individual or a joint 
stock company, but it would be difficult to 
insure their observation under the con- 
ditions involved in the unrestricted con- 
trol of private owners. The foundation 

144 



A SOCIALIZED BUSINESS ENTEEPRISE 

as a legal personality is represented by 
what is called the Stiftungs-V erwaltung , 
or governing board. For the management 
of the business there are in addition the 
Vorstdnde, or managing boards, one for 
each of the works that may exist at any 
time, and a commissioner, who represents 
the governing board in the meetings of the 
managing boards. The rights and duties 
of the government of the foundation are 
entrusted to that department of the grand 
ducal government which has charge of the 
University of Jena, and the permanent 
commissioner must be a high officer as- 
signed by the minister to this duty. The 
enterprise is thus under the ultimate con- 
trol of the government, subject always to 
the terms of the trust. Each managing 
board of a business enterprise must con- 
sist of a group, which, however, cannot 
contain more than four members. In the 
case of the optical works, at least one mem- 
ber of this board must be connected with 
the management of the glassworks. The 
members are appointed by the government, 
after due consideration of the report of the 
commissioner and of the other members of 
the board, and no one can be appointed 

145 



THE ECONOMIC UTILIZATION OF HISTOEY 

against the unanimous vote of these mem- 
bers. Only those persons can be appointed 
who are experts, either in science or in 
business, and at least one member must be 
an expert scientist in the subjects con- 
cerned in the business. This board prac- 
tically manages the business interests, and 
when the Zeiss-Stiftung was fully devel- 
oped and its statutes adopted, which was 
not until 1896, Abbe simply became one of 
the three members of the board of the 
Zeiss-Werh. The statutes provided that 
they should not be revised for ten years. 
At the end of that time, in 1906, some minor 
changes were made, and the description 
given here will apply to the statutes in 
their present form. Elaborate provisions 
are made, under which further amend- 
ments may be introduced, but they are not 
encouraged. 

In describing the relations of the 
employees to the establishment, it is impor- 
tant to emphasize at the outset that Abbe 
intended to maintain in the fullest sense 
of the word the freedom of the employees 
and, therefore, to avoid anything savoring 
of paternalism, either in the good or bad 
sense of the term. That is to say, he did 

146 



A SOCIALIZED BUSINESS ENTEEPEISE 

not wish to have the business treat its 
employees like a fairy godmother, nor, on 
the other hand, to take advantage of their 
dependence npon it in order to influence 
either their political or their social ideas. 
His aim was to make their relations busi- 
ness relations, nothing more. Business, 
however, does not necessarily mean the 
crudest form of business. Labor contracts 
may, as already stated, take any form from 
the simplest to the most complex, without 
departing from the business basis. It goes 
without sa3dng, therefore, that all of the 
insurance features required by the German 
insurance law are included in the labor con- 
tract, and it is not surprising to find that 
some of these features were voluntarily 
anticipated in the works before the Zeiss- 
Stiftung was created, and before the insur- 
ance laws were passed, while others have 
been elaborated beyond the requirements 
of the law. Thus compulsory sick insur- 
ance was introduced as early as 1875, and 
after the passing of the imperial law, the 
fund was converted to conform to that law. 
In 1888, on the day of the death of Zeiss, a 
system of old age pensions was introduced. 
In 1892, a further step was taken in guar- 

147 



THE ECONOMIC UTILIZATION OF HISTOEY 

anteeing a minimum weekly compensation, 
provision for overtime, etc., and in the 
same year the semi-annnal medical exami- 
nation of juvenile workers and apprentices 
was introduced as a prophylactic measure 
against sickness. In 1893 a special savings 
bank for the establishment was introduced. 
Since the full establishment of the statutes 
of the Stiftung, the labor contract includes, 
besides the ordinary insurance features 
already noted, many other provisions. 
The very first article of the statutes relat- 
ing to employees says that they must be 
appointed without reference to race, con- 
fession, or political party. They must also 
be permitted to exercise their general per- 
sonal and political rights. To take up some 
more of the details, the regular working- 
day is limited to nine hours; no one is 
obliged to work overtime or on holidays, 
excepting in the case of interruptions of 
the works, and contracts for overtime can- 
not be made for more than four weeks. All 
workers over eighteen years of age are 
entitled to a holiday of twelve working- 
days, and if any are appointed to honorary 
offices in the service of the empire, the 
state, or the town, the necessary leave of 

148 



A SOCIALIZED BUSINESS ENTEEPEISE 

absence must be given for this purpose. 
Provision is also made for committees to 
represent the workers. 

All must be appointed for a time wage, 
which is fixed in advance, per week or per 
month, and is to be paid for the holidays 
which fall on week days, but otherwise they 
are to be paid only according to the time 
which is spent. This pay cannot be low- 
ered in the case of a temporary or perma- 
nent shortening of the working-day, unless 
the man in question is unable to continue 
his former activity, or, for reasons which 
lie in himself, passes over to another posi- 
tion. In the case of piece work, the fixed 
time wage counts as a minimum income, 
and pay is continued during the regular 
yearly vacation. 

Important incidents of the labor contract 
are, of course, the insurance features. The 
sick fund cannot give the members less 
than full allowance for a half year (since 
extended to a year), three-fourths of the 
average wages as a sick allowance, insur- 
ance of the nearest family members, free 
choice of the physicians among the certi- 
fied physicians of the dwelling place, and 
obligatory contribution on the part of the 

149 



THE ECONOMIC UTILIZATION OF HISTOEY 

management equal to the contributions of 
the insured. Employees who have entered 
the service before their fortieth year and 
have worked for five years have a legal 
claim for a pension, if they become unable 
to work or otherwise to continue their 
activity, except for gross faults on their 
part, while those dependent upon them also 
receive an allowance. In general, the pen- 
sion amounts to 50 per cent of the nominal 
wage for those who have worked between 
^ve and fifteen years, and it increases by 
1 per cent up to the fortieth year. The 
total may thus become 75 per cent of the 
wage. Nothing is said about insurance 
against accidents, as this is regulated 
under the general laws and is a charge 
upon the business. One of the most pecu- 
liar and significant features of the labor 
contract is the provision for an indemnifi- 
cation upon dissolution of the relation. 
Two weeks * notice must be given on either 
side, for ordinary workers, and six weeks' 
for those in the business office. In addi- 
tion to this, those who have been in the 
service for three years, after the comple- 
tion of their eighteenth year, have a claim 
for indemnity, if they are dismissed with- 

150 



A SOCIALIZED BUSINESS ENTEEPEISE 

out being incompetent to continue their 
work or are guilty of some fault which has 
led to their dismissal. This indemnity 
takes the form of the continuation of their 
previous wages for the six months follow- 
ing their dismissal, and for those who have 
a claim to a pension, the indemnity cannot 
be less than the amount of their invalidity 
pension for a period equal to a quarter of 
the time of service on which it would be 
reckoned. Thus the longer a person has 
been in the service, the larger his indem- 
nity. His dismissal for some serious 
fault, such as drunkenness, dishonesty, 
etc., causes the forfeiture of this right. 
The reason for this peculiar provision is 
not so much to give the men a present as 
to bring a pressure to bear upon the man- 
ager not to cut down the number of hands 
unnecessarily in a period of business de- 
pression, which in turn, of course, implies 
not increasing them unduly in case the 
business becomes suddenly active. The 
aim is to maintain a certain steadiness in 
the number of employees and thus avoid 
violent fluctuations. 

Not less important than the provisions 
regarding the employees are those which 

151 



THE ECONOMIC UTILIZATION OF HISTOEY 

relate to the profits. Special clauses define 
the statistical methods which are to be 
applied. These may be roughly condensed 
as follows. The yearly expenditure is the 
sum of all expenses and obligations which 
are due within the fiscal year, including the 
payments for pensions, etc., which are to 
be treated as part of the cost of produc- 
tion. The business gain or deficit is the 
difference between the expenditure as just 
defined and the total income ; the net profit 
of each establishment is obtained by taking 
into account a proper amount for deprecia- 
tion and interest on the capital, which shall 
include, besides the regular rate of interest 
on mortgages, a premium for risk, corre- 
sponding to the average loss of capital in 
similar industries. This, however, is not 
the amount available for dividends. In 
order to secure the permanency of the 
works, a certain sum is set aside for a 
reserve fund, which includes among other 
things a sum necessary to secure the vari- 
ous demands for pensions, indemnities, 
etc., a sum for extending the business, and 
a sum to make good a possible loss. When 
it has reached an amount sufficient to 
meet these requirements, a constantly 

152 



A SOCIALIZED BUSINESS ENTEEPEISE 

diminishing sum is to be added to it. 
After all of these demands are met, the 
Stiftung is, according to circumstances, to 
set aside one-half or three-quarters of 
what remains for the purposes expressed 
in section B, namely, the general interests 
of the industry or of science. The final 
disposition of the reserve fund rests with 
the Stiftung s-Verwaltung, or administra- 
tion. Special provision is, however, made 
for sharing the profits with the employees. 
The percentage which is thus to be added 
to wages and salaries from the profits is 
to be determined from year to year in such 
a way that, taking account of the fluctua- 
tions in the activity of business, a proper 
relation shall exist between the share of 
the employees and the share of the founda- 
tion, according to the specified provision 
made for this purpose. These are defined 
in a general way by the statement, that the 
aim is not so much to increase the net 
profits as the total output, and that the 
Stiftung shall retain that part of the 
profits which has been earned, not by the 
laborers as individuals, but rather by the 
organization as a whole and as a going 
concern. 

153 



THE ECONOMIC UTILIZATION OF HISTOEY 

A word should be said regarding this so- 
called profit sharing. Abbe himself once 
delivered an address on the subject, in 
which he took up the various arguments 
commonly urged in favor of profit sharing 
and rejected them all. One point that he 
especially emphasized was that the system 
was liable to be illusory, because there was 
always great danger that the nominal 
wages paid would be reduced by the 
amount paid as a share in the profits, so 
that the total wages would be no more than 
before. He put no faith in the power of 
profit-sharing devices to conciliate the dif- 
ferences between the employer and em- 
ployed.^ Nevertheless, he introduced a 
system of profit sharing in his foundation 
on other grounds. The share in the profits 
was not intended to give the worker in 
good years more than he would ordinarily 
receive. Nevertheless, it was important, 
because it made it possible to establish 
nominal wages which in bad years would 
secure the laborer against having his earn- 
ings pushed below a certain level. He 
illustrates his point by a simile. In the 
industrial organization of the optical 

2 Abhandlungen, Vol. Ill, p. 109. 
154 



A SOCIALIZED BUSINESS ENTEEPEISE 

works, he states, there are two beams upon 
which the important interests of the work- 
ing forces are supported. One is a strict 
wage system, by which the manager is 
pledged to certain minimum rates even in 
bad years. The other is the financial 
strength of the enterprise, on which the 
execution of this wage system depends. In 
order that these two beams may be held 
together they are supported by a special 
bolt, that is, the profit which in good years 
makes the income of the workers depend 
upon the fluctuations of business. On this 
bolt there is a pretty rosette; namely, the 
pleasure which the individual gets from 
sharing in the profits. The significant 
thing, however, is not the rosette but the 
bolt. In point of fact, the enterprise has 
yielded profits enough to be divided every 
year but one, but the amount has varied 
considerably, ranging, except in the year 
1902-03 when nothing was divided, from 5 
per cent to 10 per cent.^ 

The nominal working-day, as already 
stated, was limited by the statutes to nine 
hours. In point of fact, they have had an 

3Schomerus: Arbeitsverhaltniss, p. 10. 
155 



THE ECONOMIC UTILIZATION OP HISTOEY 

eight-hour working-day since 1900, and the 
manner in which this change was brought 
about is so characteristic that a word or 
two should be said about it. At the begin- 
ning of 1900 the question was put to the 
employees: '^Who is willing to try to pro- 
duce as much in eight hours as hitherto in 
nine hours T' About six-sevenths of the 
employees voted for the experiment, and 
the eight-hour day was introduced provi- 
sionally for a year. The result was very 
satisfactory. It could not be measured 
exactly, excepting in the case of the piece 
workers, but it turned out that here the 
output was not only not less, but that it had 
increased about 4 per cent. When the 
matter was looked into more carefully, and 
the workmen questioned, they said that in 
the beginning they worked very hard in 
order to keep up their production and their 
pay, but that they found this too exacting ; 
then they dropped into the old pace and 
wanted a return to the nine-hour day. The 
figures showed, however, that they had not 
gone back to the old pace. They had given 
up the killing pace, but had returned to 
one which was still higher than the old 
one and yielded a slightly larger output. 

156 



A SOCIALIZED BUSINESS ENTEEPRISE 

Abbe explained the matter in a very simple 
way. He established an equation of human 
exertion, according to which the daily 
expenditure of energy must be equal to the 
daily replacement; this expenditure de- 
pends upon three elements : (1) the produc- 
tion; (2) the speed; (3) the fatigue during 
the intervals of labor, the seconds or min- 
utes lost in driblets, while standing or 
waiting in the noise and the bad air of the 
factory. These driblets are worth noth- 
ing for relaxation, but if they can be cut 
short and the time lumped, they are valu- 
able. The point is to gradually shorten the 
time of labor, until the gains coming from 
a longer period of relaxation and a smaller 
waste of time are still greater than the 
loss due to increased speed. The limit 
represents the optimum. This will, of 
course, differ according to the occupations 
and the intelligence of the people. The 
case could not be proved so exactly for the 
time workers, but it was thought that here, 
too, there was no loss of output. The con- 
sequence is that since April, 1901, the 
eight-hour day has been the rule. The 
hours vary according to the season. In 
summer they are from 7 to 11.30 and 1.30 

157 



THE ECONOMIC UTILIZATION OF HISTOEY 

to 5; in winter, from 7.30 to 12 and 2 to 
5.30. Pauses for luncheon, morning and 
afternoon, are, however, now abolished 
and the prohibition of drinking during the 
working hours has, doubtless, something 
to do with the favorable results of the 
shorter day. 

Some incidental features should still be 
mentioned. A good deal has been done for 
the general education and benefit of the 
people, especially in the maintenance of 
the VolhshauSj with a fine library, reading- 
room, etc. Baths, too, have been intro- 
duced. The factory has even gone into the 
business of manufacturing temperance 
drinks to sell to the employees, and of sell- 
ing milk to them on a large scale. Money 
is loaned, to help people build houses, at a 
moderate rate of interest. But there are 
no company houses. There are schools for 
instruction in trades, etc. The question of 
patents is distinctly dealt with in the 
statutes, and it is provided that such inven- 
tions, improvements, etc., as are useful for 
the promotion of science, shall not be pro- 
tected by patents or similar measures. In 
point of fact, however, the concern has 
been obliged to take out patents in self- 

158 



A SOCIALIZED BUSINESS ENTEEPRISE 

protection, and they are regarded as a 
necessary evil.* 

Not only the workmen in the ordinary 
sense of the word, but also the officials of 
the company have to be provided for. It 
goes without saying that the higher offi- 
cials receive higher compensation, on ac- 
count of the greater responsibility put 
upon them, but, in order that they may not 
be tempted to unduly raise their own 
salaries, it is provided that the highest 
compensation shall not be greater than ten 
times the average yearly income of all 
persons over twenty-four years of age who 
have been in the works at least three years, 
according to the average of the last three 
business years. Moreover, the members of 
the boards of managers do not share in the 
profits. 

In the beginning mention was made of 
the inclusion of certain public purposes in 
the Zeiss Foundation. These have been 
realized mainly by gifts to the university. 
Indeed, the effect of the works has been, 
not only to add very considerably to the 
population and prosperity of the town, but 
also to rejuvenate the university to an 

4 Auerbach, 1. c, p. 146. 

159 



THE ECONOMIC UTILIZATION OF HISTOEY 

amazing degree. Thirty years ago the 
University of Jena, although old, was small 
and badly equipped. The profits of the 
Zeiss works have not only been used to 
add certain regular funds, but also to make 
extraordinary improvements. Among these 
are new buildings for the physical, hy- 
gienic, and mineralogical institutions, the 
creation of an institute for scientific micro- 
scopy, an extension of the chemical insti- 
tute, and the addition of a seismographic 
institute to the astronomical observatory. 
Otto Schott has also given large sums, 
especially for technical physics and techni- 
cal chemistry, out of his private means. 
Finally, the entire scale of professorial 
salaries has been reformed and raised.^ 

One naturally asks. What are the results 
of this elaborate arrangement? It is clear 
that the time is not ripe for any final 
judgment. Only about fifteen years have 
elapsed since the foundation came into 
complete working order. It has not been 
subject to the test of hard times, or of a 
change in the spirit of its management. 
The personal respect for the founders 
doubtless still counts as a factor in pre- 

5 Auerbach, 1. c, pp. 148, 155. 
160 



A SOCIALIZED BUSINESS ENTEEPRISE 

venting friction. Moreover, it must be 
remembered that this particular form of 
manufacturing is exceptional. It deals 
with mechanics of a high grade, intelligent 
and highly paid, therefore relatively stable. 
It turns out a product which contains high 
value in small bulk and is, therefore, rela- 
tively independent of questions of trans- 
portation and local conditions. It would 
be altogether rash to assume that its suc- 
cess in Jena would necessarily make it a 
model for manufacturing establishments 
in general. The enterprise as a whole is, 
of course, eminently successful. Its pro- 
duct is of the highest grade, the men are 
well paid, the average wage being about 
1,900 marks a year,^ and the relations are 
on the whole peaceful. They have never 
had a strike, though such a disturbance was 
once threatened. Dr. Schomerus is espe- 
cially appointed to look after the relations 
with the men, and his tact and skill are 
doubtless of great importance. He stated 
that the fact that the management were so 
easily approachable led to a considerable 
number of small explosions which pre- 
vented discontent from gathering to create 

6 Auerbach, 1. c, p. 123. 

161 



THE ECONOMIC UTILIZATION OF HISTOEY 

a large one. Many details in the scheme 
are even now criticised. Some authorities 
think that the limitation of the salaries 
of the head men keeps them altogether too 
low. It is clear that if the average wages 
are 1,900 marks, the maximum for the 
managers must be about 19,000 marks, or 
less than $5,000. If one may judge from 
the results, the system is hard on the brain 
workers. Both Abbe and his successor, 
Czapski, died comparatively young, the 
former at sixty-five, the latter at forty-six, 
and apparently overwork was not without 
its influence in shortening their lives. 
Though the conditions of employment 
would seem to be ideal, the hours being 
short, the wages high, the buildings clean 
and well equipped, the insurance features 
liberal, there are yet a good many socialists 
among the workers. We are told that out 
of about two thousand employees, some 
tw^o hundred would be classed as office men 
and of the remaining eighteen hundred 
about eight hundred belong to the socialist 
unions, or GewerJcschaften, about one hun- 
dred and fifty to the liberal Gewerhvereine. 
This is, of course, not necessarily a sign 
of discontent with the conditions of em- 

162 



A SOCIALIZED BUSINESS ENTERPRISE 

ployment. When a business is increasing 
so rapidly, it must draw a considerable 
part of its workers from other places, and 
they naturally do not give up the political 
affiliations which they have perhaps cher- 
ished for years. On the other hand, the 
fact that they belong to a party which is in 
its faith, if not in its works, revolutionary, 
also indicates that they do not believe that 
they have found an economic paradise, 
even in Jena. It would not be strange, 
perhaps, if all of the two thousand employ- 
ees did not fully share the ideal aims of the 
founder, even though they are perfectly 
willing to share in the profits which his 
genius has made possible, and it is said 
that they sometimes begrudge the large 
sums given to the university. 

The interest and significance of the 
Zeiss-Stiftung to the writer lie more in the 
motives and ideas which it embodies than 
in its details. Many of the results accom- 
plished by the Zeiss-Stiftung are accom- 
plished by great enterprises in other parts 
of the world under a different form. When, 
e.g., Mr. Carnegie gives ten millions of 
steel bonds to found an institution for 
scientific research, he is putting the United 

163 



THE ECONOMIC UTILIZATION OF HISTORY 

States steel Corporation under the obliga- 
tion of contributing a certain part of its 
earnings toward this purpose, very much 
as the managers of the Zeiss-Stiftung set 
apart some of the earnings of the works in 
order to promote scientific study in the 
University of Jena. Likewise when the 
steel corporation and other companies set 
aside some of their stock to be acquired by 
employees, they give these holders, not 
only a share in the profits of the business, 
but also an interest in preserving the per- 
manent strength of the whole enterprise, 
as distinguished from the temporary ad- 
vantage of one class of workers. The steel 
corporation, however, was founded to make 
money for its stockholders and bondhold- 
ers. It is merely through an act of gener- 
osity on the part of individual owners of 
securities that it may be made to contrib- 
ute toward scientific research or other pub- 
lic objects, whereas the social relations of 
capital are recognized in the very business 
constitution of the Zeiss-Stiftung, 



164 



CHAPTER XI 

Social Myopia 

In the parable of the Good Samaritan 
we are told of a man traveling from Jeru- 
salem to Jericho, who ^ ^ fell among thieves, 
which stripped him of his raiment, and 
wounded him, and departed, leaving him 
half dead.''^ The Samaritan saw his 
plight ; took him to an inn ; spent the night 
with him; and as he paid his bill on the 
morrow said to the innkeeper, ^^whatso- 
ever thou spendest more, when I come 
again, I will repay thee.'' The Good 
Samaritan showed all of the traits which 
we still consider most valuable in the char- 
itable at the present day. He had a lively 
sympathy, which caused him to stop and 
inquire into the condition of the wounded 
man ; he had the spirit of altruism, which 
impelled him to give aid; he had practical 
sense, which enabled him to do it in the 
most effective manner; and he had the 
imagination to think of the future and 

iLuke X. 30. 

165 



THE ECONOMIC UTILIZATION OF HISTOEY 

provide for its needs. All of these quali- 
ties we recognize as good, but do we always 
apply them! Above all, do we sufficiently 
cultivate the social imagination? 

In reading the parable, one is almost 
tempted to imagine a sequel to the story, 
in order to more thoroughly adapt it to 
modern conditions. Let us suppose, for 
example, that, when the kind deed of the 
Samaritan became known in Jerusalem, it 
stimulated others to follow his example. 
A number of well-meaning people united 
themselves into a society to establish a 
hospital on the way from Jerusalem to 
Jericho, and equip it with doctors and 
nurses, in order to give treatment to all 
who might fall into the hands of thieves by 
the way. The hospital did a large busi- 
ness, and the demands upon it increased so 
rapidly that one generous individual de- 
cided to endow it with a fund, out of the 
income of which those who lost their money 
by robbery might be reimbursed. After 
many years of operation, during which 
the demands made upon it fully justified 
its existence in the minds of the founders, 
the Samaritan happened to come back to 
Jerusalem and attended the annual meet- 

166 



SOCIAL MYOPIA 

ing of the society. Whereupon he arose 
and addressed the members somewhat as 
follows : 

' ' I have studied the work of this society 
for many years, and it seems to me that 
a large part of the money which we are 
spending goes into the pockets of the 
thieves. If they see a defenseless traveler 
going to Jericho, they rob him before he 
reaches the halfway hospital; they then 
lie in wait for him further down the road 
to relieve him of the money which he has 
just been receiving. Thus, what we spend 
is really encouraging the outlaw, and we 
are maintaining an endless chain of char- 
ity. I propose that, before spending any 
more money on the hospital, we endeavor 
to interest the authorities, and see if it 
is not possible to so police the road that no 
robbery will be possible upon it." 

But when the Samaritan had made this 
speech, he was charged with being no bet- 
ter than a cold-blooded economist, and 
requested to leave the meeting. 

This modernized parable may seem like 
a grotesque caricature of the facts. But 
let us examine, without prejudice and 
without fear, some of the conditions under 

167 



THE ECONOMIC UTILIZATION OF HISTOEY 

which charity work is carried on in our 
country, before we say confidently that we 
do not maintain an endless chain of our 
own. 

I shall not speak here of those elements 
in society which prey upon the community 
openly and avowedly, nor of the familiar 
vices and failings of human nature which 
are the cause of so much evil. I shall 
refer rather to those more subtle forces, 
which are often so fixed in our customs 
and our institutions that we hardly recog- 
nize them as thieves, and indeed should 
consider it uncivil to refer to them as such. 
As it is easy to pillory those beings which, 
having no ears cannot hear, and having no 
voices cannot talk back, I will mention first 
those bandits of the body which are respon- 
sible for most of our modern ailments and 
which, though they do not strip us of our 
raiment, often leave us half dead or en- 
tirely dead by the wayside of life. These 
bacilli, as they are commonly called, are 
of many kinds, and I need not distinguish 
among them. The bacillus of tuberculosis 
enjoys perhaps the greatest reputation on 
account of the extent of his depredations ; 
but the bacilli of anthrax, of typhoid, of 

168 



SOCIAL MYOPIA 

scarlet fever, are active according to their 
lights and their opportunities. 

It is well known that most, if not all, 
of these robbers of health and efficiency 
thrive in crowded cities and houses. It 
is also known that they are especially 
favored by filth. Nevertheless, our coun- 
try, as a whole, and our cities, in particu- 
lar, are striving with might and main to 
increase, not the population bred from the 
old stock, but the immigrant population, 
and though we are well aware that this 
congestion brings new dangers to health, 
we make no adequate provision against 
the spread of disease. Let us take a con- 
crete example. 

In a city, not a thousand miles removed 
from the State of Connecticut, the robber 
bacilli have been found to be so active that 
a movement was inaugurated some years 
ago to put them in jail and try at least 
to diminish their depredations upon way- 
faring men. In other words, it was pro- 
posed to establish an isolation hospital. 
The citizens were unanimously in favor of 
the project, in the abstract, but whenever 
it was proposed to give a local habitation 
as well as a name to this excellent idea, 

169 



THE ECONOMIC UTILIZATION OF HISTOEY 

the people in the neighborhood of the pro- 
posed site regularly rose up as one man, 
and protested against its establishment on 
the ground that it would lower the price 
of real estate. The wise men of the city, 
after having vainly tried a number of sites, 
at last thought that they had found a solu- 
tion of the difficulty, and decided to build 
a modern well-equipped establishment on 
the site of some hospital pavilions in which 
contagious diseases had been treated for 
years. Inasmuch as land in the neighbor- 
hood has steadily advanced in value and 
been embellished by the building of private 
houses, churches, stores and saloons, it 
was thought that the objection regarding 
the value of real estate would not apply. 
But the same cry arose again, and the hos- 
pital is still unbuilt. In the meantime, the 
demands upon voluntary charity and the 
burden of disease to the sufferers are 
increasing. 

Let us look at a different phase of the 
subject. As a nation, we are justly proud 
of the development of our industries, of 
our railroads, and of our machinery. We 
encourage them by law. Certain industries 
seem so important that we lay a tax on the 

170 



SOCIAL MYOPIA 

consumer in the form of a protective tariff 
in order to maintain them. Our patent 
laws encourage inventions. Our corpora- 
tion laws encourage production on a large 
scale and give the investing capitalist the 
benefit of a limited liability. Our railroads 
enjoy the right of taking private property 
for their uses, and often of using the pub- 
lic highways. But all of these things lead 
to accidents, and many of them to disease. 
In the year ending June 30, 1911, our 
railroads killed 3,519 passengers and em- 
ployees, and injured 60,235. The employ- 
ees naturally bore the brunt of this ; 3,163 
of them were killed and 46,802 were in- 
jured.^ Coal mining we know to be pecu- 
liarly dangerous. In 1908, 2,450 coal min- 
ers were killed and 6,722 injured in the 
United States. One man was killed for 
each 278 employed. We do not know how 
many persons were killed in all of the 
industries of the United States, but the 
State of New York has gathered figures for 
accidents in factories, quarries, and tunnel 
constructions, and in the single year 1909 
there were 15,437 accidents, of which 258 

2 Interstate Commerce Commission Eeport for 1911, p. 

77. 

171 



THE ECONOMIC UTILIZATION OF HISTOEY 

were fatal and 1,543 resulted in permanent 
injury.^ One of our most careful statis- 
ticians estimates the number of fatal acci- 
dents, among occupied males in the United 
States, as between 30,000 and 35,000 in a 
single year, and thinks that half of these 
are due to some industry.* That this rate 
is terrible is obvious; that it is greater 
than it should be, is seen by comparing our 
figures with those of European countries. 
For instance, in the United Kingdom in 
1904, one man was killed on the railroads 
for 1,398 employed; in the United States, 
one man is killed for 385 employed. In 
Great Britain, one out of every 148 may 
expect to meet with some accident; in the 
United States, one out of every 30. In coal 
mining the accident rate is more than twice 
as great as in the principal European coun- 
tries. We kill one man for every 278 em- 
ployed, while in Europe one for every 724 
employed is killed.^ These accidents may 

3 Gilbert Lewis Campbell : Industrial Accidents and 
their Compensation, 1911, pp. 9, 10. 

4 F. L. Hoffman : Bull, of Bureau of Labor, Washing- 
ton, Vol. XVII, 1908, p. 418. 

5 Campbell, 1. c, pp. 10, 14, 16 and 17. The coal mining 
statistics refer for five European States to the year 1903, 
for twenty-two States of the United States to 1908. 

173 



SOCIAL MYOPIA 

be fairly said to be the outcome of indus- 
tries directly encouraged by law. They 
are well known. It would seem meet, 
therefore, that the same law which encour- 
ages the accidents should do something 
to diminish their prevalence. A few such 
laws have been passed, but they have been 
very slow in coming, and when they have 
finally been issued, they have, in a large 
number of cases, been found to conflict 
with the higher law of the constitution. 
Even when they have been sustained, it 
has cost the injured person much time and 
money to enforce his rights. 

In 1893, Congress enacted a law requir- 
ing railroads to use, among other safety 
appliances, automatic couplers. On Aug- 
ust 5, 1900, a brakeman by the name of 
Johnson was endeavoring to effect a coup- 
ling between a freight engine and a dining 
car, standing on a side track, and, while 
doing so, had his hand so badly crushed 
that it had to be amputated at the wrist. 
There was no question as to the intention 
of the law or as to the fact that the man 
had lost his hand. But there was a very 
serious question as to whether a dining 
car standing on a side track was engaged 

173 



THE ECONOMIC UTILIZATION OP HISTOEY 

in interstate commerce, and until this 
weighty question could be settled, which 
took until December 10, 1904, Johnson 
could recover no damages from the rail- 
road. Think of a man with his hand ampu- 
tated, waiting four years for the lawyers 
to split hairs over such a question! This 
is not an isolated but a typical case.^ 

Another question occurs in connection 
with accidents. On whom shall the burden 
of the accident fall! An accident, by its 
very nature, is something unexpected. 
The individual cannot always be prepared 
for it. In the case of property, insurance 
has long been known as a device for 
spreading over a large group of interested 
persons the burden of the loss that may 
come from fire, explosion, or other sudden 
disasters. For a quarter of a century, peo- 
ple in other parts of the world have begun 
to realize the advantage, not merely to the 
individual, but to the community as a 
whole, of applying the same principle to 
accidents to workers, and have introduced 
some form of compulsory workmen's com- 
pensation, or of accident insurance, usu- 
ally carried in the main by the industry, 

6 Johnson vs. South. Pac. Co., 196 U. S., p. 2. 
174 



SOCIAL MYOPIA 

or group of industries combined. The 
principle is not new in our country, as 
applied to sheep. If a farmer's sheep are 
killed by a dog, the selectmen can cause 
the owner of the dog to pay damages, or 
if they cannot find him, compensate the 
sheep's owner out of the public funds. 
Slowly the idea has gained ground in our 
country that a similar principle might 
well be applied to human beings and, after 
much discussion, a law was passed by the 
State of New York in 1910 designed to 
provide a moderate compensation to in- 
jured workers, even when no blame could 
be attached to the employers. The act was 
very carefully drawn, with a full knowl- 
edge of the constitutional breakers which 
lay ahead of it. It applied only to a limited 
number of occupations commonly recog- 
nized as extra-hazardous. This law was 
declared unconstitutional by a decision of 
the New York Court of Appeals handed 
down March 24, 1911, on the ground, 
among others, that it violates the XlVth 
amendment to the Federal Constitution. 

As the decision was unanimous, it must 
be considered good law, and it would be 
foolish for a layman to express an opinion 

175 



THE ECONOMIC UTILIZATION OF HISTOEY 

on the legal aspects of the case. But when 
the lawyer speaks of good law, he does not 
mean good legislation, still less good sense, 
or good economics. Now the economics of 
the decision is simply this : It is not com- 
petent for the legislature to pass a law 
throwing the burden of an accident upon 
the industry in which it arises, and requir- 
ing employers to treat the cost of medical 
attendance, sick allowance, etc., as they do 
the losses by fire and explosion. There- 
fore, the loss must fall either upon the 
victim himself or, if he has insufficient 
means, as is the common case, upon the 
charitable public or the taxpayer. In order 
that an obligation shall not be put upon an 
employer, ^^who has committed no wrong,'' 
a burden is laid upon those who have not 
only committed no wrong, but have no con- 
nection whatever with the accident, except- 
ing as they live in the same state. Here 
is another case of the endless chain of 
charity work, created as the result of the 
application of constitutional law. 

We can hardly blame the courts for this 
situation, since they are but following the 
law as they understand it. Nor can we 
blame the employers. As long as there is 

176 



SOCIAL MYOPIA 

any reasonable doubt of the constitution- 
ality of a law, they are morally obliged to 
subject every new enactment to the test of 
a lawsuit. Moreover, the best employers 
recognize a moral obligation far beyond 
that which any law imposes upon them; 
and in the whole movement for a more 
enlightened policy, they have borne an 
active and important part. The respon- 
sibility really rests with the people them- 
selves, and with their political leaders. 
That is to say, it falls upon us all ; because, 
rather than amend our constitutions so 
that they will clearly state what they mean, 
we persist in subjecting them to this con- 
stant strain, and thus, in the words of John 
Hays Hammond, have developed laws 
which, ^^to put it mildly, are a disgrace to 
our country.'" 

Custom is often as strong as law, some- 
times even stronger. We are all familiar 
with the tyranny of fashion. Women who 
would be too squeamish to crush a fly in 
their hands, will demand that others shall 
Mil birds, even to the extermination of a 
species, to embellish their hats, if fashion 

7 Address in Philadelphia, April 8, 1911, quoted in 
New-YorTc Tribune, April 9, 1911. 

177 



THE ECONOMIC UTILIZATION OF HISTOEY 

demands it. This tyranny of habit is rec- 
ognized. It has often been the cause of 
injury to human beings as well as to birds, 
and the Consumers' League is organized 
for the express purpose of educating con- 
sumers to some thought for those who 
serve them, or who manufacture the goods 
that they use. Yet we have made com- 
paratively little progress in this direction, 
and habit is playing its part in the endless 
chain of modern charities. 

An example taken from recent expe- 
rience will illustrate this point. It is well 
known that white phosphorus, commonly 
used in the manufacture of matches, is a 
poison which is liable to produce the ter- 
rible disease of phosphorus necrosis in 
the workers. It has also caused the death 
of many children who have ignorantly put 
matches into their mouths, and has fre- 
quently been used for criminal purposes. 
Altogether, it is a poison the use of which 
for many reasons it is desirable to limit 
and, if possible, abolish. In Europe it has 
been felt to be so dangerous that nine 
states have entered into an international 
agreement to prohibit white phosphorus 
matches. A bill aiming to accomplish this 

178 



SOCIAL MYOPIA 

same purpose by a prohibitory tax was 
introduced into the Congress of the United 
States in 1910. The situation was pecu- 
liar in that this bill was endorsed, not only 
by the Association for Labor Legislation, 
which caused it to be drafted, and by the 
American Federation of Labor, represent- 
ing the workers, but also by almost all of 
the manufacturers of matches, who recog- 
nized the danger and expressed themselves 
as quite willing to submit to an inconven- 
ience, or even an increased cost of produc- 
tion, provided all were treated alike. 
When, however, the members of Congress 
were approached upon the subject, it was 
discovered that the bill was by no means 
sure of passage, and among other objec- 
tions one prominently mentioned was that 
the consumers would not be satisfied with 
the substitutes. I procured matches made 
of sesquisulphide of phosphorus, which is 
considered to be one of the best substitutes 
for poisonous phosphorus, and undertook 
to demonstrate its effectiveness to a mem- 
ber of Congress by showing him how easy 
it was to light the match, not only on a 
rough surface, but even on a piece of com- 
paratively smooth paper. He, however, at 

179 



THE ECONOMIC UTILIZATION OF HISTOEY 

once took one of the matches and applied it 
to the seat of his trousers. It did not ignite. 
He had shrewdly detected the weak point 
of the substitute, and also the strong point 
of the opposition. For matches are used 
chiefly by smokers, and smokers, it seems, 
have a strong preference for lighting 
matches on the seats of their trousers. 
While the sesquisulphide match will light 
on almost any surface, and indeed can be 
lighted on the trousers seat, a good deal 
of pressure is needed to secure results. 
It is to be hoped that this objection may be 
overcome. Perhaps the tailors will gal- 
lantly come to the rescue of the girls who 
make matches and equip the seats of our 
trousers with a suitably roughened sur- 
face. Perhaps the quality of the match 
itself may be improved. Indeed, this has 
already taken place, and a New Jersey fac- 
tory has successfully marketed a large 
quantity of the non-poisonous matches. In 
the meantime, it is a fact that the objection 
mentioned was a serious obstacle to the 
legislation in question and helped to delay 
its enactment until 1912. 

This is not the only contribution made 
by the habits of smokers to the endless 

180 



SOCIAL MYOPIA 

chain. We have not yet, I hope, forgotten 
the terrible fire of 1911 in New York, in 
which 145 workers in the Triangle shirt- 
waist factory met a shocking death. Ac- 
cording to statements made by the authori- 
ties who investigated it, but one cause of 
the fire was discovered, and that was cigar- 
ette smoking; yet it is remarkable that, at 
least in the newspapers which have come 
to the attention of the writer, no blame 
seems to be attached to the smokers, but all 
of the blame is thrown upon the employ- 
ers and the builders. Several fires have 
occurred in the Yale grandstand at the 
time of the annual football game, all due 
to the habits of smokers, and panics have 
been avoided only by vigilance on the part 
of the watchmen. But here again no one 
seemed to think that it might be possible 
for smokers to have sufficient regard to 
the rights of the public to extinguish their 
matches, cigars, and cigarettes before they 
throw them down. In New Haven in the 
single year 1910 the fire department was 
called out forty-nine times by fires clearly 
attributable to smokers, apart from the 
large number caused by matches, some of 
which were doubtless used by smokers. 

181 



THE ECONOMIC UTILIZATION OF HISTOEY 

In Massachusetts 111 forest fires, involv- 
ing a loss of $33,000, were started by smok- 
ers in 1908, and, next to locomotive sparks, 
tobacco was the most prolific of the ascer- 
tained causes of forest fires in that State.® 

Indeed, our custom actually raises smok- 
ers to the position of a privileged class. 
They are the only people who can get two 
seats in a drawing-room car by paying only 
one fare; and for their sake our railroads 
must supply more seating room than they 
can sell. 

Many seem to consider the right to 
smoke anywhere and everywhere one of the 
fundamental rights of man. A city legis- 
lator recently asserted his right to smoke 
in the public sessions of the Board of 

8 F. W. Eane : We Must Stop Forest Fires in Massa- 
chusetts, 1909, pp. 7-9. Official figures regarding forest 
fires caused by smokers are inevitably understatements, on 
account of the difficulty of obtaining conclusive evidence. 
Hence in a large number of cases the cause is put down 
as ^'unknown." Eef erring to fires caused by smokers, 
hunters, etc, Mr. Eane says, in his Seventh Annual 
Eeport as State Forester of Massachusetts : * * There is no 
doubt that most of the fires labelled 'unknown' would 
be placed in this colimin if they could be traced out; so 
that we feel sure that they cause as many fires as the 
railroads, and are more dangerous, because the smoke is 
everywhere" (pp. 47-48). 

182 



SOCIAL MYOPIA 

Alderman. A New York newspaper has 
called attention to the dangers which come 
from cigarette smoking in the lobbies of 
theaters, not on the part of red Indians but 
on the part of men who carry gold cigar- 
ette cases. With such examples, can we 
wonder that shirtwaist cutters consider it 
one of the rights of American citizens to 
smoke when at work, and that our smoking 
habits make no small contribution to the 
endless chain of accidents and hospital 
cases? 

' ' God, that men should put an enemy 
in their mouths to steal away their 
brains!'' The robber alcohol is familiar 
to us all, but we do not always realize the 
extent of his robberies. Some years ago 
a committee of fifty was formed for the 
express purpose of studying the liquor 
problem in its various aspects. One of its 
sub-committees made a study of its eco- 
nomic aspects. With the aid of a large 
number of societies, prison wardens, and 
other persons, it tried to find out how many 
persons had committed crime or had fallen 
into dependence as the direct or indirect 
result of the use of alcohol. 

The investigation was made with the 

183 



THE ECONOMIC UTILIZATION OF HISTOEY 

greatest care by a study of individual 
cases, and was nothing if not conservative. 
Yet it appeared that, of the poverty com- 
ing within the field of charity organiza- 
tion societies, 25 per cent could be traced 
directly or indirectly to liquor, while in 
almshouses 37 per cent was so traced and 
not less than 45 per cent of the destitution 
of children in institutions was due to the 
liquor habits either of the parents, guar- 
dians, or others.^ In the case of crime, a 
distinction was made between primary and 
secondary causes, and while in 31 per cent 
of the convicts investigated, liquor was 
found to be the primary cause, it figured as 
a cause more or less important in nearly 50 
per cent/° There is no doubt of the 
ravishes of this thief, who not only steals 
away our brains, but robs wives and chil- 
dren of their support, and fills our prisons 
and almshouses. I am well aware of the 
difficulty of dealing with this question. 
The very magnitude of the liquor interest 
makes it a powerful political agency which 
it is not easy to overcome. And yet in Con- 

9 John Koren : Economic Aspects of the Liquor Prob- 
lem, Houghton, Mifflin and Company, 1899, pp. 21, 22. 
10 1. c, p. 30. 

184 



SOCIAL MYOPIA 

necticut we put the control of this danger- 
ous traffic into the hands of a small body of 
persons, who are so appointed that they 
have no direct responsibility either to the 
electors or to any single administrative 
officer, and who are practically exempt 
from the ordinary checks and balances of 
a republican form of government. We 
need not wonder that a law limiting the 
number of saloons can remain a dead let- 
ter, and that it is not possible to make 
anyone responsible for its enforcement. 

The hospital for the confinement and 
treatment of contagious diseases must wait 
years for its realization, but establish- 
ments for the distribution of liquor hold 
what is virtually a position of privilege. Is 
not the community as a whole contributing 
through this policy to maintain the endless 
chain of poverty and distress? 

In calling attention to these evils, I dis- 
claim the intention of attacking any person 
or group of persons. The citizens as a 
whole, and, I do not hesitate to say, more 
particularly the property owning classes, 
are responsible for a system which creates 
constantly new demands upon their char- 
ity. Like an inexperienced bicyclist breast- 

185 



THE ECONOMIC UTILIZATION OF HISTOEY 

ing Ms first hill, who pushes with both feet 
at once, we create with one hand the evils 
which the other is trying to remedy. We 
are so anxious for gain that we do not 
realize what it costs us to conduct our busi- 
ness. The same gold ^^ gilds the straight- 
ened forehead '' of us all. 

These illustrations, which do not begin 
to exhaust the subject, are intended to 
show that, while much of the distress and 
the evil that charity tries to relieve is due 
to human nature, heredity, and other 
causes, which are very difficult to reach, 
much of the work that it is called upon to 
do is the direct result of institutions, laws 
or customs maintained with a short-sight- 
edness that would be incredible, were we 
not so inured to it that we are hardly con- 
scious of any defect in our social vision. 
But as long as an ounce of prevention is 
worth a pound of cure, and as long as it 
is kinder to prevent a person from falling 
into a ditch than to pull him out after he 
is in, so long will our work be incomplete, 
and indeed futile, unless we realize that the 
Good Samaritan must at the same time 
be a good citizen. 



186 



CHAPTER XII 

Signs of a Better Social Vision 

To provide altruism with social specta- 
cles means a great deal. It means that the 
effective charity worker will not content 
himself with the customary methods of 
relieving distress. He must sometimes 
suppress the impulses of his heart, if he 
knows that he is liable to do harm by 
yielding to them. He must also take such 
part in securing legislation, in influencing 
administration and policy, and in helping 
to guide public opinion, that the causes of 
poverty and sickness will be undermined. 
Fortunately we are already seeing evi- 
dence of sporadic individual efforts made 
in the direction indicated. What is needed 
is to co-ordinate them, help them to pull 
together, make them conscious of each 
other; in short, we want more team play. 
A few illustrations will make this clear. 

Not only accidents but many diseases 
are caused by certain industries. We are 
just beginning the study of these matters. 
Italy has established, in the city of Milan, 

187 



THE ECONOMIC UTILIZSTIOl^ OF HISTOEY 

a special hospital for the treatment and 
study of industrial diseases with the aim 
of diminishing them. This is a branch of 
what is called preventive medicine. It 
points the way to the future, and I have no 
doubt that our country will soon learn the 
lesson that Italy and other countries are 
teaching us, and apply it to our conditions. 
Still other diseases are due, as we know, 
to the conditions of living in our large 
cities. This is particularly the case with 
regard to tuberculosis. Some years ago a 
student in the Yale Medical School made 
a map of New Haven, showing the cases 
of consumption by means of red dots, and 
the map showed such an eruption of this 
rash in certain streets and houses, that 
those who were responsible for the 
study did not dare to have it published. 
We are slowly awakening to the im- 
portance of air and light. The Anti- 
Tuberculosis Association does not content 
itself with treating cases, but aims to edu- 
cate^he public through its graduates. We 
have but one tenement law on the statute 
books of Connecticut, but there is a move- 
ment to make this law more stringent, and 
the organization, in 1910, of a National 

188 



SIGNS OF A BETTEE SOCIAL VISION 

Housing Association is calculated to give 
intelligent direction to the movement for 
better housing conditions which is growing 
up all over the country. 

The psychical and social causes of dis- 
ease are at last being recognized. Under 
the leadership of the Massachusetts Gen- 
eral Hospital Society, a number of our 
hospitals, including the New Haven Hos- 
pital, have added a social feature to their 
work. We are now realizing that it is not 
enough to give the patient medical treat- 
ment ; we must also try to reach the social 
causes of disease. Modern medical schools 
now have chairs of preventive medicine. 
The professor who was called upon to fill 
that chair in the new medical school of St. 
Louis prepared himself for his work by 
studying, not merely chemistry, physiol- 
ogy, and anatomy, but by examining our 
factories and our tenements, and consult- 
ing with economists and sociologists. 

An illustration of the importance of eco- 
nomic considerations in the profession of 
medicine was brought out recently by Dr. 
Lyman of the Gaylord Farm Sanatorium. 
Looking at the matter from the strictly 
medical point of view, a patient recovering 

189 



THE ECONOMIC UTILIZATION OF HISTOEY 

from tuberculosis should live an out-of- 
door life, and take up some occupation 
which secures this. An actual study of 
cases has shown, however, that in general 
those patients maintain their improvement 
best who go back to their old occupations, 
not because these are medically desirable, 
but because they furnish a better support 
and are better adapted as a rule to the 
abilities of the patients than are out-of- 
door occupations, which usually involve 
undue exertion or great physical strength. 

New forms of public activity are being 
developed. The social settlements, the 
Consumers' Leagues, the G-eorge Junior 
Eepublics, the Society for Mental Hygiene, 
the visiting nurses and housekeepers, the 
Boy Scouts, are examples of efforts made, 
not to exercise, but to forestall charity. 

Even our nomenclature is changing. The 
expression '^social service'' is supplanting 
the word '^charity." The magazine for- 
merly known as Charities is now called 
The Survey, and it was under its direction 
that the remarkable study of industrial 
conditions, known as the ^^ Pittsburgh Sur- 
vey," was made a few years ago. People 
who wish to go into social work are now 

190 



SIGNS OF A BETTEE SOCIAL VISION 

receiving training in special schools, some- 
times called schools of philanthropy, but 
more appropriately, as in the case of the 
Chicago school, named schools of civics and 
philanthropy. Science and charity are no 
longer strangers, but are working hand in 
hand. 

In short, we are beginning to realize, in 
the words of Dr. Cabot, that, '' Science 
without humanity becomes arid and, 
finally, discouraged. Humanity without 
science becomes scrappy and shallow."^ 

We thus need to unite all of the agencies, 
whether philanthropic, scientific, or civic, 
whose activity may diminish or relieve dis- 
tress. The suggestion, made by Mr. Kel- 
logg at the Connecticut Conference of 
Charities and Correction held in 1910, that 
we should have more charity organization 
societies in Connecticut, is worthy of seri- 
ous consideration. We not only need more 
societies, but we need to organize them on 
a broader basis, and to have a greater co- 
ordination between those in different cities. 
A preliminary step toward such a broader 
understanding lies in a knowledge of the 

1 Eiehard Clarke Cabot : Social Service and the Art of 
Healing, 1909, pp. 30, 31. 

191 



THE ECONOMIC UTILIZATION OF HISTOEY 

facts. It is strange that, although so many 
people are interested in these subjects, and 
so much money is annually contributed, no 
one has more than a very vague knowledge 
as to the total amount which is spent, 
either in the State or in any one city of 
the State, during a given year. As a step 
toward supplying this need, and at the 
same time emphasizing its existence, the 
Organized Charities Association of New 
Haven has attempted a directory of local 
societies, and a summary of their financial 
condition. It is not complete, and abso- 
lute accuracy in such matters is perhaps 
unobtainable, but it is hoped that it will at 
least give some facts of general interest 
and stimulate other societies to follow our 
example. It is significant that this piece 
of work was planned by the directors of 
the society and executed by a divinity stu- 
dent under the direction of a professor of 
political economy. 

Some people are afraid that organiza- 
tion will make charity too mechanical and 
impersonal. There is danger of fossiliza- 
tion in any form of public service, but it is 
not greater in the new era, which I believe 
to be dawning, than it has been in the past. 

193 



SIGNS OF A BETTEE SOCIAL VISION 

Could anything be less personal than drop- 
ping a copper into the hat of a beggar? 
This form of charity is as mechanical as is 
the *^wheezer'' hand organ, whose doleful 
notes are studiously designed by the manu- 
facturer to work upon the sympathies of 
the passer-by. The new charity makes 
greater demands upon the individual, be- 
cause it requires thought and work as well 
as sympathy and doles. It demands a 
social imagination strong enough to appre- 
hend not only what we see with our eyes, 
but what we do not see. It requires us to 
look at future as well as at immediate 
results. It is optimistic because it hopes, 
not without good reason, to be able to 
diminish as well as relieve distress. It 
demands the co-operation of many profes- 
sions. It enlists in its campaign the law- 
giver, the engineer, the physician, the econ- 
omist, the statistician. It is substituting 
the trained expert for the amateur. It is 
insisting that philanthropy shall be far- 
sighted as well as kind. It even expects 
that this far-sightedness will in the future 
influence our business activities, as well as 
conventional charity. 



193 



INDEX 

Abbe, Ernst, birth and education, 139; founds Carl- 
Zeiss-Stiftung, 142; Gesammelte Ahhandlungen, 
138; life shortened by overwork, 162; member 
of board of Zeiss-WerTc, 146; on eight-hour day, 
157; on profit-sharing, 154; on relations of em- 
ployees to establishment, 146, 147; principle of 
trieder binocular applied by, 141. 

Aeatallactic, definition of 123 

Accidents, burden of, 95, 174-176; caused by indus- 
tries, 187; compensation for, 70, 71; compulsory 
insurance for, 134; deaths from industrial, in 
Pittsburgh, 102; encouraged by law, 173; in coal 
mines in U. S., 171; in New York State, in fac- 
tories, quarries and tunnel construction, 171; 
insurance against, 70 ; need for fuller records of, 
99, 111; new causes of, 70; number of, in U. S. 
compared with Europe and Great Britain, 172; 
on railroads in U. S., 171; preventable, 3, 73; 
problem of labor legislation to diminish, 70; 
social causes of, 3; treaty for compensation for, 
71. 

Administration, experimentation through 38 

Aerial navigation 66 

Agricultural experiment stations 65 

Agriculture, application of science to, 64, 65; 
methods of, 42 ; schools of, 65. 

Aimes, Hubert H. S 133 

Alaska, 98 ; instructiveness of history of, 48, 49. 
Alcohol, crimes committed as result of, 183, 184; 
poverty caused by use of, 183, 184. 

Allison Act 14 

Altruism, needs social spectacles, 187; spirit of, 165. 

195 



INDEX 

American Association for Labor Legislation, 82, 119, 
121; advocates reporting of industrial diseases 
and accidents. 111; and lobbying, 119; drafts 
phosphorus bill, 179; study of administration of 
labor laws by, 117. 

American Economic Association 51 

American Federation of Labor, endorses phosphorus 

bill 179 

American Historical Association 53 

American History, Turner 's Social Forces in 53 

American Industrial Society, Documentary History of 51 

Amonn, Alfred 29, 30 

Anarchist, philosophical 48 

Annuities, distribution of wealth by 124 

Anti-Trust Law 15 

Anti-Tuberculosis Association ' . . . 188 

Anthracite coal strike 19 

Arbitration, compulsory, 85, 135; voluntary, 85. 

Aristotle 23 

Artificial selection 60 

Associations, co-operative 85 

Astronomy and deduction 10, 11 

Auerbach, Felix 138 

Australia, wage boards and compulsory arbitration 

systems in 135 

Automatic couplers, law requiring, on railroads .... 173 

Babcock tester 127 

Bargaining, collective, joint boards for, 85; new 
machinery necessary for, 69. 

Bellamy Clubs 38 

Benefit societies, 85; in Switzerland, 113. 

Bimetallic theory 14, 15 

Blackstone, on requisites to good government, 104; 
opinion of British Parliament, 104. 

Books, property right in, enforced by law 127 

Boy Scouts 190 

196 



INDEX 

British Association for Advancement of Science. ... 26 
Brodsky, E. J., insurance in fraternal and benefit 

societies 113 

Brook Farm 38 

Brooks, Eobert C 16 

Budgets, of clubmen, 48 ; family, 23 ; of workingmen 48 

Buffalo, adaptation of, to environment .58, 59 

Business, artificial stability of, created 71 

Cabot, Dr. Kichard Clarke, "Social Service and Art 

of Healing" 191 

Campbell, Lewis Gilbert, on industrial accidents . . . 172 

Canada 37 

Capital, benefited by changes in organization, 71; 
government intervention to save deterioration 
of human, 71; increase in, 68, 69; law putting 
new responsibilities upon, 71 ; legal privileges of, 
24; legal restrictions on, 24. 

Capital contract, forms of 130-132 

Carl-Zeiss-Stiftung, see Zeiss-Stiftung. 
Carnegie, Andrew, 163 ; on hereditary wealth, 45. 

Carnegie Institute 101 

Carnegie Institution of Washington 11, 50, 65 

Caste system , 78 

Changes, in consumers ' wants, 68, 71, 72 ; in methods 
of organization, 68, 71; in methods of produc- 
tion, 68, 70, 71. 

Charities 190 

Charities, directory of, in New Haven 192 

Charity, 177-186; condition under which it is 
carried on, 167, 168; demands of new, 193; 
examples of efforts to forestall, 190; fear that 
organization will make impersonal, 192, 193; 
ignorance of amount spent on, 192; private, 63; 
team work needed in, 187 ; working hand in hand 
with science, 191. 
Charity worker, the effective 187 

197 



INDEX 

Chicago school of civics and philanthropy 191 

Children, argument for protecting, 94 ; destitution of, 
caused by liquor habits of parents, 184; effects 
of machinery upon, 70; lack of adequate laws 
for protection of, 98, 107; law limiting age of 
employment of, 84, 88; law limiting hours of 
employment of, 84, 88; playgrounds for, 97; 
views of Alexander Hamilton on labor of, 79. 

China 26 

Cigarette smoking, cause of Triangle shirtwaist fire, 
181 ; in lobbies of theatres, 183. 

City and Suburban Homes Company 126 

Civilization, by-products of, 63; effects of, upon 

nature, 58, 59; hunting stage of, 60. 
Civilized man and struggle for supremacy over 

nature 58-60 

Civics, schools of 191 

Civil Service examination for factory inspectors .... 117 

Clark, J. Maurice 39 

Clark, Prof. John Bates, on elements of economic 

progress 68-72 

Coal mining, accidents in the U. S. in 171 

Coartacion 133 

Collective bargaining 69, 85 

Collectivism 96 

Colonies, British, compared with the U. S 37 

Commission, President's Anthracite Coal, 20; expert 100 
Committee of Fifty on the Liquor Problem . .9, 183, 184 

Committee on Public Health 106 

Common law, re-enacted in Massachusetts 114 

Commons, Prof. John E 51 

Compensation, workmen's, see workmen's compensa- 
tion. 
Competition, free, considered as a cure for the abuses 

of trade, 15; limitation of, 135. 
Compromise of 1850 36 

198 



INDEX 

Compulsory arbitrtttion 85, 135 

Compulsory insurance, 90, 108; in Germany, 79, 92, 
134; laws regarding, 84; of sick in Zeiss- 
Stiftung, 147, 149 ; see also workmen 's insurance. 

Concomitant variations, method of 5, 6, 13 

Connecticut, Conference of Charities and Correction, 
191; control of liquor trafiSc in, 185; inexperi- 
ence of legislators in, 105; isolation hospital in 
city in, 169, 170; tenement house law of, 188. 

Conquest, law of 62 

Conservation, 97; labor legislation part of move- 
ment for, 80, 81 ; societies relating to, 39. 
Constitution, Federal, 77, 103 ; laws to diminish acci- 
dents found to conflict with, 173; New York 
State Workmen's Compensation act violates 
XlVth amendment of, 175, 176. 

Constitutions, amendment of 109, 177 

Consumers' Leagues, 190; purpose of, 178. 

Consumers ' wants, changes in 68, 71, 72 

Contract, capital, forms of, 130-132; labor, 62; labor, 
in Zeiss- Stiftung, 149, 150; law of, 62; legal 
form of, influences machinery of production, 
130-137; terms read into, by law, 134; wage, 85, 
132-135. 

Co-operation, productive 136 

Co-operative associations 85 

Corporation laws, encourage production on large 

scale 171 

Corporations, public service, 39; records of, 50; 

regulation of, 36. 
Courts, power of, to nullify laws interrupts experi- 
mentation in U. S 49 

Crimes, due to alcohol 183, 184 

Cross, Prof. Ira B 39 

Currency 36, 42 

Custom, often as strong as law 177 

199 



INDEX 

li, Siegfried 138, 142, 162 

Davenport, Dr. C. B 46 

Decadence, national 48 

Deduction 10, 12 

Deductive school 18 

Deficiencies of nature 25 

Degeneracy, human 25 

Description, contrasted with science 53-54 

Dewey, Prof. Davis E., presidential address of 51 

Diminishing returns, law of 24 

Discoveries, eagerness with which pursued, 66 ; readi- 
ness to use, as basis of property rights, 66; 
tendency to anticipate, 65, 66. 

Disease, economic 25, 26 

Diseases, attempt to reach social causes of, 189; 
caused by conditions of living in cities, 188, 189: 
hospital for industrial, in Milan, 112, 187, 188; 
industrial, 70; lack of information regarding 
industrial, 99; national investigation of indus- 
trial, urged by American Association for Labor 
Legislation, 111; preventable, 73; psychical and 
social causes of, 189; study of industrial, 187, 
188. 
Distribution of wealth, 24; by gift, 124; by graft, 
125; by law, 124; by marriage, 124; by wiU, 
124; not as simple as was once assumed, 122; 
without reference to law of supply and demand, 
123-126. 
Distributive or positive labor legislation, 84, 85, 89-91 
Documentary History of American Industrial Society 51 

Documents, State economic, index of 50 

Domestication, stage of 60 

Drafting, necessity for careful, in legislation, 115; 

society for, 116. 
Dynamic society, Clark's elements of 68-72 

200 



INDEX 

Economic conditions, retard good legislation 100 

Economic experimentation, advantages of the U. S. 
for, 34-42 J contrasted with observation, 13; dis- 
advantage of economist in, 49 ; ethical difficulties 
of, 1-4, 13; favorable conditions for, in U. S., 
37-42; fields of, 42-49; hindered by inadequate 
records, 50-52; interfered with in the U. S. by 
the courts, 49; John Stuart Mill on, 5-7; logical 
objections to, 4-6; objections to, discussed, 6-10; 
referred to by Ely, Keynes, and von SchmoUer, 
27; referred to by Newmarch and Jevons, 26; 
through legislation and administration, 38; tried 
in self-interest, 39; views of economists regard- 
ing, discussed, 28-31; wage receivers and, 40. 

Economic forces, operation of 53 

Economic history 40 

Economic ideal of U. S 77-80 

Economic interests, 34; and political questions, 36. 
Economic interpretation of history contrasted with 

economic utilization of history 52 

Economic laboratory, conception of history as 52 

Economic laws 23, 28, 29 

Economic material, 33 ; buried in state archives, 50. 

Economic pathology 25, 26, 48 

Economic phenomena, analysis of 24 

Economic processes, influenced by legal or institu- 
tional factors 124 

Economic progress, Clark's elements of, 68-72; 
involves labor legislation, 73; spirit of, 64. 

Economic questions in the history of the TJ. S 36 

Economic reactions, study of 46, 47 

Economic results of laws, importance of recording. . 52 
Economic science, Jevons' contribution to, 28; scien- 
tific management applied to, 32; two phases of, 
55, 56. 
Economic system, pathologic state of 25 

201 



INDEX 

Economic theory, Professor Ely 's views on 82 

Economic utilization of history contrasted with eco- 
nomic interpretation of history 52 

Economics, laws of, 52; of decision against New 
York State workmen's compensation law, 176. 

Economist, disadvantages of, in experimentation, 49; 
qualities needed by, 56; task of, 22. 

Economists, Italian, 31; point of view of, contrasted 
with that of historians, 53; reliance of Federal 
and State governments upon trained, 51 ; theories 
of, and economic experiments, 15. 

Ehrich, Louis R 96 

Eight-hour day, in Zeiss- Stiftung 156, 157 

Ely, Prof. Eichard T., 27; on relation of labor legis- 
lation to economic theory, 82. 

Employers ' liability laws, 84 ; recognize moral obliga- 
tions, 177; relation of, to employed weakened, 
69. 

Endless chain of charity, contribution of alcohol to, 
183, 184; contribution of habit to, 177-186; con- 
tribution of habits of smokers to, 178-183; 
created as result of application of constitutional 
law, 176; responsibility for, 177, 185. 

Engel 's law 23 

England, 37; average duration of life in, 72; experi- 
ence in posteritism in, 97; forms of wage con- 
tracts in, 133. 

Eugenics, 97; not yet an exact science, 73. 

Europe, experience in posteritism, 97; history of, 
compared with U. S., 34, 35 ; number of accidents 
in, compared with U. S., 172; under compulsory 
insurance laws, 134. 

Evils, connected with efforts to improve social insti- 
tutions, 61-63; due to changes in methods of 
production, 70 ; of progress, legislation necessary 
to prevent, 68. 

202 



INDEX 

Exchange, terms of, affected by distributive legisla- 
tion 85 

Experiment station, advantage of U. S. as 37 

Experimental evolution, laboratory of 11 

Experimental method, see economic experimentation. 

Explorations, polar, and the press 65, 66 

Factories, accidents in, in New York 171 

Factory inspectors, Prussian requirements for, 117, 

118; qualifications for, 116, 117. 
Factory system, 70; advocated by Alexander Hamil- 
ton, 79. 

Fairview Colony of Single Taxers 38 

Family budgets 23 

Fashion, tyranny of 177, 178 

Favors, distribution of wealth by special 125 

Federal Constitution 77, 103, 173, 175, 176 

Feudal system 77, 78 

Fires caused by smokers 181 

Fischer, Dr 120 

Fischer, Max 142 

Fisher, Prof. Irving 30, 73 

Forces prominent in European history 34 

Forest fires in Massachusetts caused by smokers . . . 182 

Forests, measures for preserving 97 

France, labor unions in, 92; treaty for compensation 
for accidents between Great Britain and, 71. 

Free competition, and the Anti-Trust law 15 

Free passes on railroads 125 

Freehold, preferred in New England to feudal land 

tenures 35 

Fugitive Slave Law 36 

Galileo 54 

Galton, Sir Francis 46 

Gaylord Farm Sanatorium 189 

George Junior Eepublic 190 

German historical school 12, 27-30 



INDEX 

Germany, compulsory insurance in, 92, 134, 147; 
compulsory sick insurance in, 79; historical 
school of, 12, 27-30; labor unions in, 92; rail- 
roads of, compared with those of U. S., 128; 
system of old age insurance in, 114. 
Ghent, system of insurance against unemployment in 92 

Gide and Eist 30 

Gifts, distribution of wealth by 124 

Good Samaritan, parable of, 165; sequel to parable 

of, 166, 167; should be a good citizen, 186. 
Government, intervention of, to save deterioration of 

human capital 71 

Graft, a cause of unequal distribution of wealth .... 125 

Gratuities 133 

Great Britain, number of accidents in, compared with 
those in U. S., 172; treaty for compensation for 
accidents between France and, 71. 
Gresham 's law, analogy of, applied to labor problems 86 
Guernsey, prosperity of island of, attributed to 

rente 131, 132 

Gult 132 

Habit, contribution of, to endless chain 177-186 

Hale, Dr. George E 11 

Hamilton, Alexander, views of, on child labor 79 

Hammond, John Hays 177 

Harris tweeds 61 

Hereditary wealth, Andrew Carnegie on 45 

Heredity 12, 31, 45, 46 

Herod 1-3 

Heterogeneity of people of U. S 41 

Historians, point of view of, contrasted with that of 

economists 53 

Historical Association, American 53 

Historical facts, scientific value of 32 

Historical laws 23 

Historical method 29 

204 



INDEX 

Historical school, German .12, 27-30 

Historiometry 31 

History, conception of, as economic laboratory, 52; 
dynamic period of world 's, 64 ; economic, 40, 54 ; 
economic interpretation of, contrasted with eco- 
nomic utilization of, 52; law of, 52; social 
forces in American, 53. 
History, Documentary, of American Industrial 

Society 51 

Hoffman, Dr. F. L., accident statistics 172 

Homestead exemption laws 78 

Horn, General von 94 

Hospital, for industrial diseases in Milan, 112, 187, 

188; isolation in Connecticut, 169, 170, 185; 

Massachusetts General, 112, 189; U. S. compared 

to a, 37. 

Hours of labor, in Zeiss-Stiftung, 148, 155-158 ; laws 

limiting, of children, 84, 88. 
Housing conditions, movement for better, 189 ; tuber- 
culosis caused by unsanitary, 188. 

Human life, average duration of 72 

Human scrap heap 102 

Ideal, economic, of U. S 77-80 

Idleness, voluntary 48 

Imagination, scientific, 23; social, 166. 

Immigration 36, 69 

Incidence of taxation 24 

Income, surplus 24 

Increment, unearned, taxation of 16 

Indentured labor 43, 132 

Index of State economic documents 50 

Individualism, not the only antithesis to socialism, 95, 96 
Industrial accidents, see accidents. 
Industrial diseases, see diseases. 

Industrial organization, new forms of 39 

Industrial poisons, list of 120 

305 



INDEX 

Insurance, accident, 70, 134; compulsory, 84, 90, 92, 
108, 134, 147, 149; in benefit societies in the 
U. S., 113; in Germany, 79, 114, 134, 147; in 
Zeiss- Stiftung, 147, 149, 150; invalidity, 134; 
investigation of, in New York, 125 ; of aerial 
risks, 66; of old age in Germany, 114; of sick in 
merchant marine of U. S., 79 ; of sick in Switzer- 
land, 113; unemployment, 92; workmen's, 70. 
Interest, affected by law or custom, 123 ; rate of, 42 ; 

rate of, in Wall Street, 126. 
Interests, economic, 34; and political questions, 36. 
International Association for Labor Legislation, 71; 
application of practical principles by, 119, 120; 
Bulletin of, 120. 

International treaties 71 

Interpretation, economic, contrasted with economic 

utilization of history 52 

Intestacy 35, 36 

Invalidity, compulsory insurance against 134 

Inventions, encouraged by patent laws, 171; policy 
of Zeiss- Stiftung regarding, 158, 159; property 
right in, 127. 
Investigations, Committee of Fifty, on Liquor Prob- 
lem, 183, 184; New York insurance, 125; Sage 
Foundation, of salary loan business, 126. 

Irrigation 80, 81, 97 

Italy, hospital for industrial diseases in ..112, 187, 188 
Jena, University of, 145, 164; confers degree on Carl 
Zeiss, 142 ; gifts of Zeiss- Stiftung to, 159, 160. 

Jevons, W. Stanley 15, 16, 26-28, 37 

Johnson vs. Southern Pacific Eailroad Company, 173, 174 

Kellogg, Charles P 191 

Keynes, John Neville 27, 28, 30 

Kiao Chau 16 

Knies, Karl 29 

206 



INDEX 

Labor, application of free, 43; child, 88; effect of, 
on production, 44; experiments in efl&ciency of, 
43; hours of, in Zeiss-Stiftung, 155-157; inden- 
tured, 43, 132; legal status of, 24; methods of 
applying, to land, 43; new standard of, created, 
88; organization of, 36; problems affecting, 68; 
reaction of wealth upon efficiency of, 44; skilled, 
70. 

Labor contract, 62; forms of, 132-134; in Zeiss- 
Stiftung, 149, 150. 

Labor laws, administration of, 117; lien, 134; 
"master and servant," obsolete expression in, 
69; necessity for recording operation of, 118; 
number passed in U. S. in 1907, 98; Prussian 
child, 94. 

Labor legislation, aims to distribute wealth, 95 ; aims 
to preserve race, 94; American Association for, 
see American, etc. ; analogy to monetary legisla- 
tion, 86-92; classes of, 83-93; conservation and, 
80, 81 ; consistency given to, 79, 80 ; distributive 
or positive, 84, 85, 89-91; economic progress 
involves, 73; grouped as socialistic, 95; history 
of, shows dangers in distributive legislation, 90 ; 
International Association for, see International, 
etc. ; interstate and international needed, 71 ; less 
frequently expressive of class feeling, 76; neces- 
sary to prevent evils of progress, 68; necessity 
of careful investigation of facts in, 111; number 
of laws passed in 1907 in XJ. S., 98; permissive, 
85, 86, 91, 92; problems of, 70, 71; promptness 
of, 75; protective, 84, 86-89, 94, 97; purpose of, 
94; recognition of, as permanent feature, 76, 
77; requisites of. 111; societies relating to, 39; 
subject for international treaties, 99 ; uniformity 
of, 76; views of Professor Ely on relation of, 
to economic theory, 82. 

207 



INDEX 

Labor organizations, laws regulating 85 

Labor problems 43 

Labor unions, 91, 92; records of, 50. 

Labor welfare, Zeiss- Stiftung and 158 

Laboratory, economic, conception of history as ... . 52 

Laboratory methods 49 

Laborers, premature death of 103 

Laissez faire, 88; argument for, 110; doctrine of, 83. 
Land, methods of applying labor to, 43 ; public policy 

of U. S. in regard to, 78. 
Land tenure, 24, 42 ; societies relating to, 39. 
Lands, public, 36; policy of U. S. in regard to, 78. 
Law, affecting economic relations, 51, 52; Anti-Trust, 
15; common, re-enacted in Massachusetts, 114; 
distribution of wealth by, 124; endless chain 
created as result of application of constitutional, 
176; Fugitive Slave, 36; immutability of, 74; 
limiting number of saloons a dead letter, 185; 
made for man, 110; New York State work- 
men's compensation, declared unconstitutional, 
175, 176; of conquest, 62; of contract, 62; of 
diminishing returns, 24; of pendulum, 54; of 
supply and demand, operation of, limited by non- 
economic forces, 126-136; putting new respon- 
sibilities upon capital, 71; tenement house, in 
Connecticut, 188; terms read into contracts by, 
134. 
Law schools, science of legislation absent from cur- 
ricula of 105 

Laws, administration of, 98, 117; compensation, in 
conflict with constitution, 173, 175, 176; com- 
pulsory insurance, 90; corporation, encourage 
production, 171; early, economic ideals of, 35; 
economic, 23, 28, 29, 52; employers' liability, 
84; examples of distributive or positive, 84-86; 
examples of permissive, 85, 91 ; examples of pro- 

208 



INDEX 

tective, 84, 88 ; historical, 23 ; homestead exemp- 
tion, 78; importance of recording economic 
results of, 52; labor lien, 134; lack of, for pro- 
tection of women and children, 98, 107; limiting 
age and hours of employment, 84, 88; monetary 
circulation, 86, 87; more uniform needed, 76; 
of Modes and Persians, why immutable, 74; 
patent, 127, 171; power of courts to nullify, 
interrupts experimentation, 49 ; provision for exe- 
cution of, 116; scientific, 22, 23; statistical, 23; 
study of operation of past, 83; tenement house, 
69, 188. 
Legislation, American Association for Labor, see 
American, etc.; compared to surgery, 110; eco- 
nomic conditions retard good, 100; effects of 
careless, 107; experimental, 28; experimentation 
through, 38 ; hampered by constitution, 108, 173, 
175, 176 ; lobbying for, 119 ; necessary to prevent 
evils of progress, 68 ; necessity for careful draft- 
ing of, 115; necessity for study of pre-existing, 
114; need for, in case of overexertion and unem- 
ployment, 72; product of unskilled labor, 106; 
provision for execution of, 116; restrictive, the 
condition of economic freedom, 81; social, 28; 
see also labor legislation. 

Legislative Eeference Library of Wisconsin 100 

Legislators, lack of training of, in U. S. . . .99, 100, 105 
Legislatures, need economic annex for recording 

results of laws 52 

Leisure class 47 

Lex Bhodia de jactu 108 

Life, average duration of human 72 

Liquor, crimes committed as result of, 183, 184; 

poverty caused by use of, 184. 
Liquor interest, powerful political agency 184 



INDEX 

Liquor problem, Committee of Fifty on, 9, 183, 184; 
economic aspects of, 183. 

Liquor traffic, control of, in Connecticut 185 

Lobbying 119 

' ' Looking Backwards, ' ' Bellamy 's 38 

Lugano, meeting of International Association for 

Labor Legislation in 120 

Lyman, Dr., on employment of discharged tubercular 

patients 189, 190 

McCall, Hon. Samuel W., and experimental legisla- 
tion in Oregon 28 

Machinery, effects of 70 

Man, civilized, and struggle for supremacy over 
nature, 58-60; dealings of, with fellowmen, 60. 
Management, scientific, applied to economic science 32 

Marine Hospital Service 78, 79 

Marriage, distribution of wealth by 124 

Massachusetts, Body of Liberties, 35; forest fires 

caused by smokers in, 182; General Hospital, 

social service department of, 112, 189; law 

limiting price of stocks in, 129. 

''Master and servant" now an obsolete expression 

in labor laws 69 

Matches, non-poisonous marketed by New Jersey fac- 
tory, 180; white phosphorus, 178-180. 

Material, economic, buried in State archives 50 

Medical examination in Zeiss- Stiftung 148 

Medical school, of St. Louis, chair of preventive medi- 
cine in, 189; Yale, 188. 

Medical science, social side of 112 

Medical sociology, formation of society for study of 112 
Medicine, economic considerations in, 189; preven- 
tive, 188, 189; tendency of science of, 8. 

Mental Hygiene, Society for 190 

Method, experimental in economies, 25, 32 ; historical 29 

210 



INDEX 

Methods, laboratory, 49; of agriculture, 42, 43; of 
organization, changes in, 68, 71; of production, 
changes in, 68, 70, 71; of remuneration, 43. 

Migration, laws limiting 84 

Milan, hospital for industrial diseases in ..112, 187, 188 
Mill, John Stuart, on deduction, 10; on experimenta- 
tion, 5-7; on unearned increment, 16. 

Missouri Compromise 36 

Monetary legislation, analogy of, to labor legisla- 
tion 86-92 

Money, experience of world in dealing with, 86, 87; 
loaning of, to employees by Zeiss- Stiftung, 158. 

Moore, Prof. H. L., ''Laws of Wages ^' 30, 31 

Mores, of the people, 40 ; of time and country, 77, 78. 

Mormons 38 

Mount Wilson Observatory 11 

Muhammad, son of Tuglak 2, 4 

National Housing Association, organization of, 188, 189 

Natural resources, exhaustion of 25 

Natural sciences 10, 12 

Natural selection 60 

Nature, civilized man and, 58-60; deficiencies of, 25; 

in state of equilibrium, 58. 
Necrosis, phosphorus, 15 ; international treaty to pre- 
vent, 178; legislation against, in U. S., 179, 180. 
New England, 34; freehold in, 35; rule of primo- 
geniture abandoned in, 35. 

New Harmony community 38 

New Haven, directory of local charities in, 192; 
fires caused by smokers in, 181; map showing 
cases of tuberculosis in, 188. 
New Haven Organized Charities Association, local 

directory of charities made by 192 

New Jersey, non-poisonous matches marketed by 

factory in 180 

Newmarch, William 26, 28 

211 



INDEX 

New York, accidents in factories, quarries, and tunnel 
constructions in, 171; investigation of insurance 
in, 125; Triangle shirtwaist fire, responsibility 
for, 181; workmen's compensation law declared 
unconstitutional in, 175, 176. 

New Zealand, compulsory arbitration in 135 

Observation in economics 12 

Old age insurance, German 114 

Old age pensions, in Great Britain, 114; introduced 
into Zeiss- Stiftung, 147; laws, 84. 

Opportunity, equality of 78 

Organization, changes in methods of, 68, 71; indus- 
trial, new forms of, 39; of labor, 36. 

Organizations, labor, laws regulating 85 

Organized Charities Association of New Haven, direc- 
tory of local charities by 192 

Parasitism in ' ' leisure class ' ' 45, 47, 48 

Parliament, British, Blackstone's opinion of, 104; 
old age pension act and, 114. 

Past, records of the 53 

Patent laws, encourage inventions 171 

Patents, policy of Zeiss- Stiftung regarding .... 158, 159 

Paternalism 136 

Pathology, economic 25, 26, 48 

Pearson, Karl 19, 22, 32 

Pendulum, law of 54 

Pensions, old age, Great Britain, 114; laws regard- 
ing, 84; Zeiss- Stiftung, 147, 150. 

Peonage 43, 62, 132 

People, heterogeneity of, 41; responsibility rests 
with, for endless chain of charity, 177. 

Perfectionists 38 

Permissive labor legislation 85, 86, 91, 92 

Phenomena, analysis of 24 

Philanthropy, schools of 191 

213 



INDEX 

Phosphorus, law prohibiting use of, in XJ. S. delayed 

by habits of smokers 178-180 

Phosphorus bHl 16, 179 

Phosphorus necrosis 15, 178 

Pierstoff, Julius 138 

Pioneers of frontier, compared to those of industry 61 

Pisa, lamp in cathedral of 54 

Pittsburgh Survey, exhibit of, 100-102; made under 

direction of The Survey, 190. 

Place, Francis 14 

Playgrounds 97 

Poisons, industrial, list of 120 

Polar explorations and the press 65, 66 

Policy, public land, of U. S 78 

Poor relief, lavish, danger of, 91 ; experience of Great 

Britain with, 114, 115. 

Political questions, and economic interests 36 

Population, immigrant, 169; improvement in quality 

of, 72, 73 ; increase in, 68, 69 ; Eicardo 's theory 

of increase of, 44. 

Posteritism 96, 103 

Poverty, caused by use of alcohol 183, 184 

Prejudice, racial 35 

Preservation of race 94 

Preventable disease 73 

Preventive medicine, 188, 189; chair of, in St. Louis 

Medical School, 189. 
Primogeniture, rule of, abandoned in New England 35 
Processes, economic, influenced by legal or institu- 
tional factors, 124; mathematical, 30. 
Production, 24; changes in methods of, 68, 70, 71; 

depends upon legal form of contract, 130-137; 

effect of labor on, 44 ; encouraged by corporation 

laws, 171. 
Profit sharing, 136; in Zeiss- Stiftung, 153, 154. 
Profits, limited by public opinion or law 127-129 

213 



INDEX 

Progress, economic, Clark's elements of, 68-72; 

involves labor legislation, 73; spirit of, 64. 
Prohibitory tax to prevent use of white phosphorus 179 
Property rights, in inventions, 127; readiness to use 
discovery as basis of, 66. 

Protective labor legislation 84, 86-89, 94, 97 

Protective tariff, 90, 171; Alexander Hamilton and, 
79; Mill and, 5-7; wealth of nations and, 6, 10. 
Prussia, child labor laws of, 94; qualifications for 
factory inspectors in, 117, 118. 

Public, restriction of profits in interest of 128, 129 

Public Health, Committee on, in Conn 106 

Public lands of U. S 36, 78 

Public poor relief 63 

Quintilian 115 

Eaee, liberty of, 78; purpose of labor legislation to 

maintain quality of, 94. 
Eaces, materials bearing upon mixture of, in U. S., 
48 ; wars of, 35. 

Eacial prejudice 35 

Eailroads, accidents on, in U. S., 171; aesthetic obli- 
gations of, 127, 128; enjoy right of eminent 
domain, 171; in U. S. compared with those in 
Germany and Switzerland, 128; law enacted 
requiring automatic couplers on, 173. 

Eane, F. W 182 

Eeactions, economic, study of 46, 47 

Eecords, imperfection of, 51; inadequacy of, 50; of 
operation of laws, necessity for, 52. 

Eegulation of Corporations 36 

Eeligion, wars of 34 

Eemuneration, methods of 43 

Eent, affected by form of law, 123; determination 
of, 126. 

Bente, in Guernsey 131, 132 

Eicardo, David 44 

214 



INDEX 

Rist, Charles 30 

Roosevelt, Theodore 58, 59 

Roscher, Wilhelm 29 

Ruskin Colony 38 

Safety appliances, laws requiring 84 

Sage Foundation, 65; investigation of salary loan 

business by, 126. 
St. Louis Medical School, chair of preventive medi- 
cine in 189 

Salaries, of offtcials of Zeiss- Stiftung 159 

Samaritan, Good, and the good citizen, 186; parable 
of, 165 ; sequel to parable of, 166, 167. 

Savings, compulsoiy 92 

Schloss, David 133 

Schmoller, Gustav von 18, 27, 30 

Schomerus, Dr. Fr 138, 161 

School, Chicago, of civics and philanthropy, 191; 

St. Louis Medical, 189; Yale Medical, 188. 
Schools, law, 105; of agriculture, 65; of philan- 
thropy, 191. 

Schott, Dr. Otto 140 

Schumpeter, J 22 

Science, application of, to agriculture, 64, 65; con- 
trasted with description, 53-54; "dismal,*' 55; 
economic, Jevon's contribution to, 28; economic, 
two phases of, 55, 56 ; of legislation, conspicuous 
by its absence from curricula of law schools, 
105 ; working hand in hand with charity, 191. 
Sciences, co-operation between, 112; natural, 10, 12. 

Scientific economist, aim of 21, 22 

Scientific imagination 23 

Scientific laws 22, 23 

Scientific management, applied to economic science 32 
Scientific method, see economic experimentation. 

Scrap heap, human 102 

Selection, artificial, 60 ; natural, 60. 

215 



INDEX 

Serfdom 132 

Sesquisulphide of phosphorus 179 

Shakers 38 

Sherman Act 14 

Sick insurance, in Germany, 79, 134; in merchant 
marine in U. S., 79; in Switzerland, 113; in 
Zeiss- Stiftung, 147, 149, 150. 
Sickness, compulsory insurance against . . . 134, 147, 149 

Silver 14 

Single Taxers, Fairview Colony of 38 

Slavery, 36, 43, 62, 63 ; forms of, 132, 133. 

Smith, Adam 15 

Smokers, cause of forest fires in Massachusetts, 182; 
contributions to endless chain of charity by, 
180-183; fires caused iu New Haven by, 181; 
fires in Yale grandstand caused by, 181; raised 
to position of privileged class, 182, 183; respon- 
sible for Triangle shirtwaist fire, 181. 

Social imagination, demanded by new charity 166 

Social organism 19 

Social policy, experiments in 28 

Social service supplanting charity 190 

Social Utopias 38 

Socialism, 95, 96, 103; advocated as remedy, 63, 64; 
among employees in Zeiss- Stiftung, 162, 163; 
argument for, 47. 
Societies, benefit, 85; to promote reform, 39. 

Soil, exhaustion of 25 

Somerf eld, Prof. Th 120 

Southern Pacific Eailroad Company vs. Johnson 173, 174 

Spaniards and coartacion 133 

Special favors, distribution of wealth by 125 

Spoils system 98 

State, intervention of, in labor, 89; necessary, 73. 
Statistical laws 23 

316 



INDEX 

Statistics, imperfection of vital and accident, 111; 
vital, registration of, 99. 

Stiftungs-V erwaltung , of Zeiss- Stiftung 145, 153 

Strike, anthracite coal 19 

Stimson, F. J 114 

Straubel, Eudolf 142 

Struggle for existence, civilized man and 60 

Supply and demand, law of, limited by public opinion 
or law, 127-129; not affecting distribution of 
wealth, 123-125. 

Surplus income 24 

Survey, The, Pittsburgh Survey made under direc- 
tion of 190 

Sweden, average duration of life in 72 

Switzerland, Civil Code of, provides for Giilt, 132; 
investigation of sick insurance in, 113 ; railroads 
of, compared with those of the U. S., 128. 

Talcott, Governor 36 

Tariff duties 126 

Tax, prohibitory, on poisonous matches 109 

Taxation, 43; incidence of, 24. 

Taximeter, a means of avoiding disputes 135 

Taylor, Frederick W 44 

Team work, need of, 31; in charity work, 187. 

Tenancy, free 43 

Tenement house laws, 69; in Connecticut, 188. 

Trade Unions 14, 20, 43, 75 

Treaties, international, 71; legislation a subject for, 
99. 

Triangle shirtwaist fire, responsibility for 181 

Tuberculosis, 97, 168; deaths from, in Pittsburgh, 

102; due to conditions of living in large cities, 

188; employment of patients recovering from, 

190; map showing cases of, in New Haven, 188. 

Tunnel constructions, accidents in New York State 

in 171 

217 



INDEX 

Turner, Frederic J 53 

Typhoid fever, deaths from, in Pittsburgh 101 

Unconstitutionality, bugaboo of 108 

Unearned increment, taxation of 16 

Unemployment, insurance against, 92; statistics of 

involuntary, 48. 
United States, accidents in coal mines in, 171; 
advantage of, as an experiment station, 37; as a 
legislative problem, 98; average duration of life 
in, 72; backwardness of law-making in, 100; 
common basis of English language and law in, 
41; compared with British colonies, 37; com- 
pared to hospital, 37; difficulties in movement 
for posteritism in, 97-102; disregard of human 
scrap heap in, 102; economic ideal of, 77-80; 
experimentation interrupted in, 49; hetero- 
geneity of people in, 41; history of economic 
experimentation in, 42; history of, compared 
with Europe, 34, 35; labor unions in, 92; 
marine hospital insurance in, 78, 79; number 
insured in fraternal and benefit societies in, 113 ; 
number of accidents on railroads in, 171, 172; 
number of fatal accidents in, 172; public land 
policy of, 78; railroads in, compared with those 
of Germany and Switzerland, 128; untrained 
legislators in, 99, 100, 105. 

United States Steel Corporation 164 

Utopias, social, in the U. S 38 

Visiting nurses 190 

Vital statistics, registration of 99 

Wage boards 135 

Wage contract 85, 132-135 

Wage receivers, and experimentation 40 

Wage system, forms of contract of 133 

Wages, affected by form of law or custom, 123; 
fixing of, by wage boards, 85; influenced by 

218 



INDEX 

other factors than law of supply and demand, ' 
129, 130; in Zeiss- Stiftung, 149; ''Laws of," 
31; observation of Mr. Taylor on, 44; rates of, 
43; Eicardo and, 44; systems of, 43. 

Wants, changes in consumers' 68, 71, 72 

Wars of race, 35; of religion, 34. 
Wealth, distribution of, 24, 62; distribution of, with- 
out reference to law of supply and demand, 123- 
127; hereditary, 45; increase in capital tends to 
make large aggregations of, 69; irresponsibility 
of, in U. S., 47; reaction of, upon efficiency of 
labor, 44; transfer of, by law, 91, 124. 

Wealthy families, parasitic members of 45, 47, 48 

Whateley, Eiehard, definition of catallactic 123 

Wills, distribution of wealth by 124 

Winkelmann, A 138 

Wisconsin Legislative Eef erence Library 100 

Women, argument for protecting, 94; failure to pro- 
tect, 107; lack of adequate laws for protection 
of, 98; laws limiting hours of employment of, 
84. 
Woods, Frederick Adams, 31, 46; on vices of aris- 
tocracy, 45. 
Worker, displacement of skilled, by unskilled, 70; 
sick or superannuated, 63. 

Workingmen, budgets of 48 

Workmen's compensation, 108, 174-176; a problem of 
labor legislation, 70; economics of decision 
against New York State law on, 176; New 
York State law declared unconstitutional, 175, 
176; principle of, 174, 175; treaty for, 71. 
Workmen's insurance, 70, 90; arguments for, 94; 
compulsory, 108, 134; compulsory, for carrying 
burden of accidents, 134, 174-176; see also 
insurance. 
Yale Medical School 188 

219 



INDEX 

Zeiss, Carl, birth and education, 138; death of, 142; 
establishment of business, 138, 139; growth of 
business, 141; interest of, in Schott und Genos- 
sen, 140. 

Zeiss- Stiftung, complicated nature of, 143; condi- 
tions of ownership of, 143, 144; criticisms of, 
162; employees appointed without reference to 
race, etc., 148; founding of, 142; general sum- 
mary of results of, 160, 161 ; gifts to University 
of Jena and for public purposes by, 159, 160; 
guarantees minimum weekly compensation, 148; 
holidays, 148; hours of labor in, 148, 155-157; 
indemnity to discharged employees of, 150, 151; 
insurance features of, 147, 149 ; interest and sig- 
nificance of, 163, 164; leave of absence for ser- 
vice of Empire or state granted to employees, 
148; medical examination of juvenile workers, 
148; notice to be given before leaving works, 
150; organization of, and management of, 145, 
146; patents, 158, 159; pensions, 150; profit 
sharing with employees, 153, 154; profits set 
aside for interests of industry or science, 153; 
purposes of, 144; relations of employees of, to 
establishment, 146, 147; reserve fund of, 152; 
salaries of oflS.cials of, 159; savings bank of, 
148; sick fund of, 149; socialists among work- 
men in, 162, 163; Stiftungs-Verwaltung of, 145, 
153; strikes in, 161; under ultimate control of 
government, 145; Vorstdnde of, 145; wages of, 
149; welfare work of, 158. 



220 



FEB 25 



